EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of August 6, 1999, by and
between XXXXXXX X. XXXXXX ("Employee") and XXXXXX TOOL & MACHINING, INC., a
Minnesota corporation (the "Company").
WITNESSETH:
In consideration of the covenants and agreements herein set forth and of
the mutual benefits accruing to the Company and to Employee from the
relationship to be established between the parties by the terms of this
Agreement, the Company and Employee agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs Employee, and Employee does hereby
accept such employment, all subject to the terms and provisions of this
Agreement. Employee shall endeavor in good faith to carry out his duties
efficiently and in a manner designed to maximize profitability.
(b) During the Initial Term, Employee agrees to devote his entire
working time, attention, and energies on a full-time basis to the business and
affairs of the Company and such other affiliates of the Company as may from time
to time exist.
(c) During the Initial Term, Employee will perform all duties, comply
with all instructions, policies and objectives as are reasonably related to the
business of the Company.
(d) During the Consulting Term (as such term is defined in Paragraph
2(a), below), Employee will serve as a consultant and not as an employee.
Employee agrees to devote such amount of time, attention, and energies during
the Consulting Term as may be required to properly complete all projects
reasonably assigned to him, taking into account his background, experience and
expertise. The extent of Employee's activities during the Consulting Term, and
the amount of time he will be required to devote to such activities, will be
determined by the Company and Employee by mutual agreement, it being understood
that Employee will be expected to devote 50 days per year to his duties during
the Consulting Term. Employee's duties during the Consulting Term will consist
of special projects assigned by the Company. In performing his duties as a
consultant, Employee will not be required to perform work on-site, but shall be
allowed to perform such work by telephone, e-mail or other medium to the extent
feasible.
(e) For purposes of this Agreement, the Initial Term and the
Consulting Term are collectively referred to as the "Term."
2. TERM.
(a) Employee's employment by the Company on a full time basis will
commence on the date hereof and will, unless earlier terminated hereunder, end
on August 1, 2000 (the "Initial Term"). Employee's retention by the Company as
a consultant will commence on August 1, 2000 and will, unless earlier terminated
hereunder, end on July 31, 2004 (the "Consulting Term").
(b) During the Initial Term, Employee's employment by the Company
hereunder may be terminated at any time, whether or not prior to the end of the
Initial Term, as follows:
(i) At the option of the Company, effective immediately upon
written notice to Employee, in the event Employee commits a material
violation of any of the provisions of this Agreement, resigns or purports
to resign unless there exists Good Reason (as such term is defined in
clause (iii) below), commits a violation of the Non-Compete Agreement
between Employee and the Company of this date, commits an act of
dishonesty involving the Company, or engages in gross or willful
misconduct during the Initial Term (such as, by way of example and not by
way of limitation, sexual harassment of an employee, or refusal or
willful failure to carry out duties) (any of the foregoing in this clause
(i) being hereinafter referred to as "Cause"). If the Company believes
that Employee has engaged or is engaging in conduct which constitutes
Cause, and if the situation is of such a nature that it can be rectified,
the Company will so notify Employee in writing and Employee will have a
period of thirty (30) days thereafter within which to rectify the
situation. For example, an act of sexual harassment would not be of such
a nature that it can be rectified. For purposes hereof, a situation will
be deemed to have been rectified only if all of the consequences of the
conduct in question are fully rectified and the conduct is not repeated.
(ii) Immediately upon Employee's death or Disability (as such
term is defined in subparagraph (c), below).
(iii) At the option of Employee during the Initial Term,
effective upon two (2) weeks prior written notice to the Company, in the
event the Company commits a material violation of any of the provisions
hereof which is not cured within thirty (30) days after written notice
thereof ("Good Reason"). For purposes hereof, the Company will not be
deemed to have committed a material violation of a provision of this
Agreement requiring the payment of money to Employee so long as the
amount in question is and remains the subject of a BONA FIDE dispute and
the Company deposits the disputed funds in an escrow account pending
resolution of the dispute. If Employee believes that Good Reason exists
for resigning and so notifies the Company in writing, and if the Company
disputes such
claim, the parties shall resolve the dispute by binding arbitration to be
conducted before a single arbitrator in Minneapolis, Minnesota accordance
with the rules of the American Arbitration Association then in effect for
commercial arbitrations. The parties shall select the arbitrator by
mutual agreement or, if they are unable to agree, each shall select an
arbitrator and the two arbitrators so selected shall select a third
arbitrator who shall conduct the arbitration. The arbitrator may, in his
discretion, allow reasonable discovery prior to the hearing and shall
have discretion to award costs (including his fees) and attorneys fees to
the prevailing party if, and to the extent, he deems such to be just and
equitable. If any funds deposited in escrow hereunder are distributed to
Employee as a result of the arbitrator's decision, Employee shall also
receive interest on the funds so distributed at the rate earned in the
escrow.
(c) For purposes hereof, Employee will be deemed to become Disabled if
Employee suffers an accident, illness or condition which, in the good faith
judgment of a reputable, qualified physician selected by the Company (the
"Physician"), (i) renders Employee, for a period of ninety (90) consecutive
days, physically or mentally unable to perform his regular duties hereunder on a
full-time basis ("Unavailable"); (ii) continues to affect Employee physically or
mentally after expiration of said ninety (90) day period; and (iii) is expected
by the Physician to render Employee Unavailable for more than six (6) months in
the aggregate in any twelve (12) month period. For purposes hereof a condition
will be deemed to affect Employee continuously unless such condition ceases for
a period of not less than forty-five (45) consecutive days.
(d) If Employee's employment terminates prior to the end of the
Initial Term, the following shall apply:
(i) Employee shall be entitled to receive his Base Salary
prorated through the effective date of termination. In addition, the
following shall apply:
(x) If Employee is discharged at any time during the
Initial Term without Cause, or if Employee resigns during the
Initial Term for Good Reason, Employee shall be entitled to
receive severance payments for the balance of the Initial Term at
the rate of $20,833.33 per month.
(y) If Employee resigns during the Initial Term,
Employee shall not be entitled to receive any further salary
payments and the consulting fee payments shall be reduced by 25%.
(z) If Employee is discharged for Cause at any time
during the Initial Term, Employee shall not be entitled to receive
any further salary payments; provided, however, the consulting
payments shall continue under the terms of this Agreement.
(ii) In any event, Employee shall be entitled to receive any
payments due to him under any life insurance policies, 401(k) plans or
other benefit programs or plans established by the Company in accordance
with the terms of such plans, and the Company shall reimburse Employee
for expenses reimbursable under Paragraph 4(a), below incurred by
Employee through the effective date of termination.
(iii) Except for the items identified in this subparagraph (d),
the Company shall have no further liability or obligation to Employee
whatsoever under this Agreement upon the termination of Employee's
employment, and the items described in this subparagraph (d) shall
constitute Employee's sole and exclusive rights and remedies with respect
to termination of his employment, regardless of the reason for
termination.
(e) If Employee's employment or retention as a consultant terminates
at any time during the Term by reason of death or Disability, Employee or his
legal representatives shall be entitled to receive consulting fee continuation
payments for the balance of the Consulting Term at the rate of $20,833.33 per
month.
3. COMPENSATION.
(a) The Company shall pay Employee a monthly base salary ("Base
Salary") during the Initial Term of Twenty Thousand Eight Hundred Thirty-Three
and 33/100 Dollars ($20,833.33). The Base Salary will be payable at the times
and in the manner dictated by the Company's standard payroll policy. Except as
provided in Section 2(d)(i)(y), the Company shall pay Employee a monthly
consulting fee ("Consulting Fee") during the Consulting Term of Twenty Thousand
Eight Hundred Thirty-Three and 33/100 Dollars ($20,833.33), except to the extent
it is reduced as provided in Section 2(d)(i)(y) above.
(b) All amounts whatsoever payable to Employee under this Agreement
are stated before withholding taxes and other payroll deductions. It is the
intent of the parties that Employee will be an independent contractor, and not
an employee, with respect to the services to be provided under this Agreement
during the Consulting Term. Nevertheless, the Company reserves the right to
withhold all amounts required by applicable tax laws and regulations. Employee
acknowledges that the Company may rely upon the advice of counsel with respect
to its withholding obligations.
4. EXPENSES, VACATIONS, BENEFITS, ETC.
(a) The Company agrees to reimburse Employee for expenses reasonably
incurred by Employee in performing his duties hereunder in accordance with such
policies and procedures as may from time to time be prescribed by the Company.
(b) During the Initial Term, Employee will be entitled to receive such
fringe benefits (e.g., group health insurance coverage) as may from time to time
be made generally available to employees of the Company and such vacation
benefits provided to Employee consistent with
past practices. The Company reserves the right to modify or discontinue any
such benefits at any time and from time to time, so long as any such changes are
made applicable to employees generally. During the Consulting Term, Employee
will not be entitled to any health insurance, sickness, disability or other
benefits whatsoever.
5. WORK PRODUCT. It is understood that works which constitute trade
secrets or which are subject to patent or copyright protection or which are
otherwise considered by the Company to be proprietary to the Company and which
have been or may hereafter be conceived or created by Employee, either solely or
jointly with others, in connection with his involvement with the Company or
which have been conceived or created by other employees of the Company
(collectively "Work Product"), are in whole or in part the result of the
resources and support of the Company. Employee acknowledges and agrees that all
Work Product shall be the sole and exclusive property of the Company.
Employee's rights in all future Work Product are hereby assigned to the Company.
In the event that any Work Product shall be deemed by the Company to be a work
of a patentable or copyrightable nature, Employee, whether or not then in the
employ of the Company, will assist the Company or its nominees to obtain,
maintain, and enforce domestic and foreign patents and copyrights for such Work
Product and will supply evidence, give testimony, sign and execute all papers,
and do all other legal and proper things (at the Company's expense) which the
Company or its nominees may deem necessary for obtaining, maintaining, and
enforcing patents and copyrights for such Work Product and for vesting in the
Company or its nominees full title thereto. Employee hereby appoints the
Company as his attorney-in-fact to execute and deliver all such papers and take
all such actions, as aforesaid in this paragraph, on his behalf. In addition,
Employee will promptly and freely disclose all Work Product to the Company's
management personnel and, if requested, provide the Company with a written
description thereof.
6. LOYALTY. Employee will give undivided loyalty to the Company
during the Initial Term and will not engage in any way whatsoever, directly or
indirectly, in any other employment, consulting or business activity (other than
passive investment activities), nor will Employee undertake planning for or
organization of any business activity other than on behalf of the Company.
7. RETURN OF ITEMS. Upon leaving the employ of the Company, Employee
will not take with him, without the written consent of the Company, any papers,
records or other materials of the Company whatsoever (including without
limitation computer listings, tapes or disks), or any copies thereof or
summaries, memoranda or other written information relating thereto, whether
created by Employee or by others, and Employee will immediately return to the
Company any of the foregoing items previously taken.
8. INJUNCTION. Employee recognizes that irreparable and incalculable
injury will result to the Company and its businesses and properties in the event
of a breach by Employee of the restrictions imposed by Paragraphs 5, 6 or 7,
above. Employee therefore agrees that, in the event of any such actual,
impending or threatened breach, the Company shall be entitled, without waiving
any other remedies that may be available to them, to temporary and permanent
injunctive relief (without the necessity of posting a bond or other security)
restraining the violation, or further violation, of such restrictions by
Employee and by any other person for whom Employee may be acting or who is
acting for Employee or in concert with Employee.
9. AMENDMENT. This Agreement may be amended only by a written
document signed by both parties to this Agreement. All previous agreements and
understandings between Employee and the Company relating to the terms of
Employee's employment and retention as a consultant are superseded hereby.
10. OTHER MATTERS. All matters related to Employee's employment with
the Company and retention as a consultant which are not addressed in this
Agreement shall be governed by such policies and procedures as may be
established from time to time by the Chairman.
11. GOVERNING LAW; ASSIGNMENT. This Agreement shall be governed by
the internal laws of the State of Minnesota. This Agreement shall inure to the
benefit of and be binding upon the heirs, successors, and assigns of the parties
hereto, except that Employee shall not assign or transfer any rights or
obligations hereunder without the prior written consent of the Company. The
Company may assign this Agreement provided the assignee assumes, in writing,
expressly for Employee's benefit, all of the Company's obligations hereunder.
12. SEVERABILITY. If any provision of this Agreement shall be
contrary to the laws of the State of Minnesota any other applicable law, at the
present time or in the future, such shall not affect the enforceability of the
remaining provisions of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in separate
counterparts which together shall constitute one and the same document.
14. ATTORNEYS FEES. The Company shall be entitled to recover its
reasonable costs and expenses (including attorneys fees) incurred in enforcing
its rights under this Agreement, in any proceeding in which it is the prevailing
party. Similarly, Employee shall be entitled to recover his reasonable costs
and expenses (including attorneys fees) incurred in enforcing his rights under
this Agreement, in any proceeding in which he is the prevailing party.
15. SETOFF. The Company and its parent company WSI Industries, Inc.
("WSI") shall have the right to offset any amounts due hereunder for any and all
liabilities, obligations or claims the Company or WSI may have against Employee
as provided in Section 5.5 of the Stock Purchase Agreement dated this date
between Employee and WSI.
IN WITNESS WHEREOF, the Company and Employee have executed this
Employment Agreement on the date above written.
XXXXXX TOOL & MACHINING, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Its: President
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EMPLOYEE:
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
