EMPLOYMENT AGREEMENT
EXHIBIT 10.1
This is an Employment Agreement (“Agreement”) between Xxxxxxx Electronics, Inc., a Minnesota
corporation (the “Corporation”), and Xxxxx Xxxxxxx (“Employee”).
Recitals
WHEREAS, Employee has been employed with the Corporation; and
WHEREAS, Employee and the Corporation are parties to an existing written employment agreement
dated effective as of January 1, 1999, as amended from time-to-time, (hereinafter collectively
referred to as “the Prior Employment Agreement”); and
WHEREAS, Employee and the Corporation have agreed to several changes with respect to
Employee’s employment;
NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth below, the
parties agree as follows:
ARTICLE 1
EMPLOYMENT; TERM OF EMPLOYMENT
EMPLOYMENT; TERM OF EMPLOYMENT
1.1) Employment. The Corporation hereby agrees to continue to employ Employee and
Employee hereby agrees to continue employment with the Corporation in the position of President and
Chief Executive Officer upon the terms and conditions hereinafter set forth in this Agreement
effective as of the date on which Employee executes this Agreement.
1.2) Term. Employee’s employment with the Corporation shall continue until terminated
by Employee or the Corporation in accordance with Articles 4 or 6.
ARTICLE 2
DUTIES; EXTENT OF SERVICES
DUTIES; EXTENT OF SERVICES
2.1) Duties. During Employee’s employment with the Corporation, Employee shall serve
the Corporation faithfully and to the best of his ability. Except as approved in writing by the
Board of Directors or its designees, which approval shall not be unreasonably withheld, Employee
shall devote his full business and professional time, energy, and diligence to the performance of
the duties of such office. Employee shall perform such duties for the Corporation (a) as are
customarily incident to his office and (b) as may be assigned or delegated to him from time to time
by the Board of Directors of the Corporation and its designees. During employment with the
Corporation, Employee shall not engage in any other business activity that would conflict or
interfere with his ability to perform his duties under this Agreement. Employee shall use his
best efforts to promote the interests of the Corporation.
2.2) Compliance with Rules; Authority. Employee agrees to be subject to the
Corporation’s control, rules, regulations, policies and programs. Employee further agrees that he
shall carry on all correspondence, publicity and advertising in the Corporation’s name and he shall
not enter into any contract on behalf of the Corporation except as expressly authorized by the
Corporation.
ARTICLE 3
COMPENSATION
COMPENSATION
3.1) Compensation for Services. As compensation for his services to the Corporation,
the Corporation will pay Employee as set forth in the attached Exhibit A, which shall be reviewed
by the Compensation Committee of the Board of Directors and/or another designee of the Board from
time to time but no less than annually. All compensation paid to Employee shall be inclusive of
all applicable income, social security, and other taxes and charges that are required by law to be
withheld by the Corporation or that are requested to be withheld by Employee. All regular
compensation shall be payable in accordance with the Corporation’s usual payroll schedule.
3.2) Benefits. Corporation will provide Employee benefits as set forth in the
attached Exhibit A. Except as specifically provided in Exhibit A, Employee shall be eligible to
participate in or receive benefits under employee benefit plans, health plans, or arrangements, if
any, made available from time to time by the Corporation to its employees as set forth in an
employee manual or otherwise including, but not limited to, medical, dental, and long-term
disability coverage, to the extent that Employee’s age, tenure, and title make him eligible to
receive those benefits. Nothing in this Agreement is intended to or shall in any way restrict the
Corporation’s right to amend, modify or terminate any of its benefits or benefit plans during the
term of Employee’s employment.
3.3) Business Expenses. During Employee’s employment, the Corporation shall reimburse
Employee for all ordinary and necessary business expenses incurred by Employee in connection with
the business of the Corporation and its subsidiaries and consistent with the Corporation’s policies
in effect from time to time with respect to travel, entertainment and other business expenses.
Payment or reimbursement to Employee will be made upon submission by Employee of vouchers, receipts
or other evidence and documentation of such expense in a form reasonably satisfactory to the
Corporation and in compliance with applicable requirements of taxing authorities. In the event the
Corporation’s Board of Directors requests the services of Employee outside the Mankato area, the
Corporation will reimburse Employee for his reasonable transportation, lodging, and meal expense
incurred in compliance with such request.
ARTICLE 4
TERMINATION
TERMINATION
4.1) Termination. Either Employee or the Corporation may terminate the employment
relationship at any time, for any or no reason, upon ninety (90) days’ written notice to the other
party. The Corporation shall have the right, in its sole discretion, to provide Employee ninety
(90) days’ pay and benefits in lieu of written notice. Notwithstanding the foregoing, the
Corporation shall have the right to terminate Employee’s employment immediately for “Cause” as
defined in Section 4.4 below.
2
4.2) Return of Property. Immediately upon termination (or at such earlier time as
requested by the Corporation’s Board of Directors or its designees), Employee shall deliver to the
Corporation all of its property, including but not limited to all work in progress, research data,
equipment, originals and copies of documents and software, customer information and lists,
financial information, and all other material in Employee’s possession or control that belongs to
the Corporation or its customers or contains Confidential Information (as defined in Section 5.1(E)
below).
4.3) Payment Upon Termination. Except as provided in Section 4.4 or Article 6, after
the effective date of termination, Employee shall not be entitled to any compensation, benefits, or
payments whatsoever except for compensation earned through Employee’s last day of employment and
any accrued benefits.
4.4) Severance. If Employee satisfies the conditions set forth in Section 4.4(C) of
this Agreement, the Corporation will provide Employee the severance benefits described in this
Section 4.4. Nothing in this provision is intended to limit the Corporation’s right to provide
Employee ninety (90) days’ pay and benefits in lieu of written notice or Employee’s right to
receive such pay and benefits, nor shall such pay and benefits in any way limit the severance
contemplated by Section 4.4 of this Agreement.
A. Termination by Employer with Cause. For purposes of this Article 4, “Cause”
shall be defined to include, but not be limited to, the following:
1. Employee’s neglect of any of his material duties or his failure to carry out
reasonable directives from the Board of Directors or its designees, or failure to
comply with rules, regulations or policies of the Corporation or its Board of
Directors;
2. Any willful or deliberate misconduct that is injurious to the Corporation,
its business reputation or its goodwill;
3. Dishonesty in any dealings between Employee and the Corporation or between
Employee and vendors or customers of the Corporation;
4. Employee’s commission of a felony, or other crime involving moral turpitude
or immoral conduct, whether or not against the Corporation and whether or not
committed during Employee’s employment;
5. Employee’s acting in a manner adverse to the best interests of the
Corporation including, but not limited to, being under the influence of alcohol or
illegal drugs while on the job; or
6. Employee’s breach of any term of this
Agreement.
3
B. Termination by Employee for Good Reason. For purposes of this Article 4,
“Good Reason” shall be defined to include the following:
1. The assignment to Employee, without Employee’s consent, of employment
responsibilities that are not of comparable responsibility and status to the
employment responsibilities described in this Agreement;
2. The Corporation’s reduction of Employee’s base salary without Employee’s
consent except for any reduction implemented as part of a broad-based employee cost
reduction initiative; or
3. The Corporation’s requiring Employee to be based anywhere other than within
fifty (50) miles of the Corporation’s principal location at the time of Employee’s
execution of this Agreement.
X. Xxxxxxxxx Benefits Upon Termination by the Corporation Without Cause or
Termination by Employee for Good Reason. If (1) Employee’s employment is terminated by
the Corporation without Cause in accordance with Section 4.1 or is terminated by Employee
for Good Reason in accordance with Section 4.4(B), and (2) Employee executes and does not
rescind a separation agreement supplied by the Corporation, which will include, but not be
limited to, a comprehensive release of all legal claims, then the Corporation will (a) pay
Employee in a lump sum or at regular payroll intervals, at the Corporation’s option, an
amount equal to twelve (12) months of Employee’s then current base salary, subject to
required and authorized deductions and withholdings; and (b) continue to pay the
Corporation’s ordinary share of premiums for six (6) calendar months for Employee’s COBRA
continuation coverage in the Corporation’s group medical, dental, and life insurance plans
(as applicable), provided Employee elects such continuation coverage and timely pays
Employee’s share of such premiums, if any.
ARTICLE 5
RESTRICTION AGAINST COMPETITION; CONFIDENTIALITY
RESTRICTION AGAINST COMPETITION; CONFIDENTIALITY
5.1) Restriction Against Competition. Employee acknowledges that he is employed in a
position of trust and confidence and has had and will continue to have access to and become
familiar
with the unique methods, services and procedures used by the Corporation and that, as part of
Employee’s duties, he has developed and will continue to develop and maintain close working
relationships with vendors, customers and employees of the Corporation and its subsidiaries.
Employee further acknowledges that the Corporation and its subsidiaries, over the years, through
goodwill, advertising, honest business methods and aggressive promotion, have built a lucrative
business and obtained loyal vendors and customers. Employee further acknowledges that disclosure
or use of any of the Corporation’s Confidential Information relating to the operation of the
business of the Corporation or its subsidiaries (as defined in Section 5.1(E) of this Agreement)
could have a serious detrimental effect upon the Corporation, the monetary loss from which would be
difficult, if not impossible, to measure. In consequence of the foregoing, and in consideration
for the
4
Corporation’s agreement to provide severance rights and benefits to Employee as set forth
in Article 4 of this Agreement and the Change of Control rights and benefits to Employee as set
forth in Article 6 of this Agreement, which Employee acknowledges and agrees are rights and
benefits to which he is otherwise not entitled, Employee agrees as follows:
A. Noncompetition. During Employee’s employment and for a period of two (2)
years after termination of Employee’s employment, regardless of the reason for and timing of
the termination, Employee agrees as follows:
1. Not to directly or indirectly engage in, own, manage, operate, join,
control, consult with, participate in the ownership, operation or control of, be
employed by, perform services for, contract with or be connected with as a director,
officer, principal, shareholder, member, agent, consultant, salesperson or
otherwise, any person, corporation, partnership or other entity that produces or
markets any product or service competitive with the Corporation’s environmental
controls and sensors business, or conspire with others to do so;
2. Not to directly or indirectly engage in, own, manage, operate, join,
control, consult with, participate in the ownership, operation or control of, be
employed by, perform services for, contract with or be connected with as a director,
officer, principal, shareholder, member, agent, consultant, salesperson or
otherwise, any person, corporation, partnership or other entity that produces or
markets any product or service competitive with the Corporation’s electronic
manufacturing services (“EMS”) business, or conspire with others to do so, in any
state where the Corporation markets its EMS business or, as of Employee’s
termination date, has articulable plans to actively do so.
B. Exceptions to Noncompetition. The restrictions contained in Section 5.1(A)
will
1. Not prevent Employee from the following:
a. Owning up to three percent (3%) of a publicly held company that
competes with the Corporation and/or its subsidiaries, so long as Employee
does not otherwise violate the terms of this Article 5; or
b. Accepting employment with a large diversified organization with
separate and distinct divisions that do not compete, directly or indirectly,
with the Corporation on the following conditions: Prior to accepting such
employment, Employee provides the Corporation written assurance that he will
not provide any of the Corporation’s trade secrets or other Confidential
Information to the new employer, will not render any services, directly or
indirectly, to any division or business unit that competes, directly or
indirectly, with the Corporation, and that he will not violate any of the
terms of Article 5 of this Agreement; or
5
2. Have no force or effect if the circumstances of Employee’s termination of
employment trigger the Corporation’s obligation to pay severance pursuant to Section
4.4 or Change of Control Termination amounts pursuant to Article 6 herein and the
Corporation is unable to pay the amount due to Employee as a result of the
Corporation’s liquidation or insolvency.
C. Nonsolicitation of Customers. Employee agrees he will not, during his
employment and for a two-year period immediately following termination of his employment
hereunder, regardless of the reason for and timing of the termination, attempt to divert any
business of the Corporation or its subsidiaries by soliciting, contacting, or communicating
with any customers of the Corporation or its subsidiaries with whom Employee, or employees
under his supervision, had contacts during the year preceding termination of his employment
or any persons or entities who might reasonably be considered within the class of customers
actively solicited by the Corporation or its subsidiaries.
D. Nonsolicitation of Employees and Contractors. Employee agrees he will not,
during his employment and for a two-year period immediately following termination of his
employment, regardless of the reason for and timing of the termination, solicit any
then-current employee or contractor of the Corporation or its subsidiaries for the purpose
of hiring or attempting to hire such employee or contractor, nor will Employee in any manner
attempt to persuade or encourage any of the then-current employees or contractors of the
Corporation or its subsidiaries to discontinue their employment or contractual engagement
with the Corporation or its subsidiaries.
E. Confidential Information. Employee will not, during or after the term of
this Agreement, directly or indirectly, use or disclose any of the Corporation’s
Confidential Information relating to the operation of the business of the Corporation or its
subsidiaries to any person, firm, corporation, association, or other entity for any reason
or purpose whatsoever except the furtherance of the interests of the Corporation or its
subsidiaries. For purposes of this Agreement, “Confidential Information” includes but is
not limited to the following:
Information not generally known and which is proprietary to the
Corporation including, without limitation, use of or customization
to computer application programs; financial, management, or customer
data that is provided, or to which access is provided, in
the course of employment by the Corporation; data or conclusions or
opinions formed by Employee in the course of employment; policies
and procedures; manuals; trade secrets; methods, procedures, or
techniques pertaining to the business of the Corporation or a
customer of the Corporation; specifications for products or services
of the Corporation; systems; price lists; marketing plans; sales or
service analyses; financial information; customer names or other
information; vendor names or other information; employee names or
other information; research and development data; diagrams;
drawings; videotapes, audiotapes, or
6
computerized media used as
training regimens; notes, memoranda, notebooks, and all other
records or documents that are handled, seen, or used by Employee in
the course of employment; information not likely to be available to
the general public without the expenditure of time or expense; and
any other information designated as such by the Corporation in its
sole discretion as confidential. “Confidential Information” does
not include (i) information which is in the public domain, (ii)
information which, through no fault of Employee, hereafter comes
into the public domain, or (iii) information disclosed to Employee
by third parties who do not violate duties to the Corporation in
disclosing that information.
5.2 Copyrights.
A. Employee hereby acknowledges and agrees that, to the extent any work performed by
Employee for the Corporation gives rise to the creation of any copyrightable material
(“Work”), all such Work, including all text, software, source code, scripts, designs,
diagrams, documentation, writings, visual works, or other materials shall be deemed to be a
work made for hire for the Corporation.
B. To the extent that title to any Work may not, by operation of law, vest in the
Corporation or such Work may not be considered work made for hire for the Corporation, all
rights, title and interest therein were assigned and are hereby irrevocably assigned to the
Corporation, including but not limited to the right to xxx for past, present, and future
infringement of any Work. All such Work shall belong exclusively to the Corporation, with
the Corporation having the right to obtain and to hold in its own name, copyrights,
registrations or such other protection as may be appropriate to the subject matter, and any
extensions and renewals thereof.
C. To the extent that title to any Work may not be assigned to the Corporation,
Employee hereby grants the Corporation a worldwide, nonexclusive, perpetual, irrevocable,
fully paid-up, royalty-free, unlimited, transferable, sublicensable license, without right
of accounting, in such Work.
D. Employee agrees to execute and deliver without further consideration such documents
and to perform such other lawful acts as the Corporation, its successors and assigns may
deem necessary to fully secure the Corporation’s rights, title or interest in all Works as
set forth in this Agreement.
7
5.3 Inventions.
A. Employee agrees to communicate promptly and fully to the Corporation all inventions,
discoveries, improvements or designs conceived or reduced to practice by Employee during the
period of his employment with the Corporation (alone or jointly with others), and, except as
provided in Section 5.3(C), Employee will and hereby does assign to the Corporation and/or
its nominees all of his right, title and interest in such inventions, discoveries,
improvements or designs and all of his right, title and interest in any patents, patent
applications or copyrights based thereon without obligation on the part of the Corporation
to pay any further compensation, royalty or payment to Employee.
B. Employee further agrees to assist the Corporation and/or its nominee (without charge
but at no expense to Employee) at any time and in every proper way to obtain and maintain
for its and/or their own benefit, patents for all such inventions, discoveries and
improvements and copyrights for all such designs.
C. This Agreement does not obligate Employee to assign to the Corporation any
invention, discovery, improvement or design for which no equipment, supplies, facility or
trade secret information of the Corporation was used and which was developed entirely on
Employee’s own time, and (i) which does not relate (A) directly to the business of the
Corporation or (B) to the Corporation’s actual or demonstrably anticipated research or
development, or (ii) which does not result from any work performed by Employee for the
Corporation.
D. Employee shall keep complete, accurate and authentic accounts, notes, data and
records of all inventions, discoveries, improvements or designs in the manner and form
requested by the Corporation. Such accounts, notes, data and records shall be the property
of the Corporation, and upon its request Employee shall promptly surrender the same to the
Corporation.
E. The obligations of this Section 5.3 shall continue beyond the termination of
Employee’s employment with respect to any invention, discovery, improvement or design
conceived or made by Employee during the period of Employee’s employment with the
Corporation and shall be binding upon Employee’s assigns, executors, administrators, and
other legal representatives. In the event Employee is called upon to render assistance to
the Corporation pursuant to Section 5.3(B) after termination of Employee’s employment with
the Corporation, the Corporation shall pay Employee reasonable compensation for the
assistance rendered and shall call upon Employee for assistance at such reasonable times so
as not to interfere with Employee’s new employment or business. For purposes of this
Agreement, any invention, discovery, improvement or design relating to the business of the
Corporation upon which Employee files a patent, trademark or copyright application within
one (1) year after termination of Employee’s employment with the Corporation shall be
presumed to have been made while Employee was employed by the Corporation, subject to proof
to the contrary by good faith, written and duly corroborated records establishing that such
invention, discovery, improvement or design was conceived
and made by Employee following termination of employment and without violation of his
continuing obligations under Section 5.1(E) hereof.
8
5.4 Specific Performance and Injunctive Relief. Employee acknowledges that the
restrictions and covenants contained in this Article 5 are reasonable and necessary to protect the
legitimate interests of the Corporation. Employee understands and agrees that the remedies at law
for any violation of the restrictions or covenants by this Article 5 may be inadequate, that such
violations may cause irreparable injury within a short period of time and that the Corporation
shall be entitled to preliminary injunctive relief and other injunctive relief against such
violation or threatened violation without the necessity of proving actual damages. Such injunctive
relief shall be in addition to and not in limitation of any and all other remedies the Corporation
shall have in law and at equity for the enforcement of such restrictions and covenants. Nothing
herein provided shall be construed as prohibiting the Corporation or Employee from pursuing any
other remedies available in the event of breach or threatened breach, including the recovery of
damages. In the event of a violation of any of the provisions of this Article 5, the successful
party shall have the right to collect a reasonable attorney’s fee for bringing such legal or
equitable action or otherwise enforcing the terms and conditions of this Article.
5.5 Acknowledgement. Employee acknowledges that he has carefully considered the
restrictions contained in this Article 5 and determined that the restrictions in this Article 5
will not unduly restrict him in securing other suitable employment in the event of the termination
of his employment with the Corporation.
ARTICLE 6
CHANGE OF CONTROL
CHANGE OF CONTROL
6.1) Change of Control Right and Payment. In consideration for Employee entering into
the noncompetition, nonsolicitation, confidentiality, and other obligations set forth in Article 5,
the following Change of Control rights and benefits will apply during the term of Employee’s
employment with Corporation:
A. For a period of two (2) years following a Change of Control, as defined in Section
6.2., Employee shall have the right, within Employee’s sole discretion, to terminate
employment with the Corporation for a “Change of Control Good Reason” as defined in Section
6.2. Such termination shall be accomplished by Employee giving ninety (90) days’ written
notice to the Corporation of Employee’s decision to terminate.
B. In the event of a Change of Control Termination, as defined in Section 6.2., then,
in lieu of any severance benefits payable under Section 4.4 and without further action by
the Board of Directors, the Corporation shall pay to Employee an amount equal to Employee’s
compensation (including any (a) base salary, and (b) annual bonuses, but excluding non-cash
fringe benefits such as insurance and perquisites) for the two completed fiscal years
preceding such termination, which amount shall be paid by the Corporation in 24 equal
monthly installments beginning on the first day of the calendar month following the calendar
month in which such Change of Control Termination occurs with the remaining payments made on
the
first day of each of the succeeding 23 months. Notwithstanding the
9
foregoing, in no event
shall Employee receive any Change of Control Action, as defined below, which would
constitute a “parachute payment” for purposes of Code Section 280G, or any successor
provision, and the regulations thereunder. In the event any Change of Control Actions would
constitute a “parachute payment,” Employee shall have the right to designate those Change of
Control Actions which would be reduced or eliminated so that Employee will not receive a
“parachute payment.” For purposes of this Section 6.1, a “Change of Control Action” shall
mean any payment, benefit or transfer of property in the nature of compensation paid to or
for the benefit of Employee under any arrangement which is considered contingent on a Change
of Control for purposes of Code Section 280G, including, without limitation, any and all of
the Corporation’s salary, bonus, incentive, restricted stock, stock option, compensation or
benefit plans, programs or other arrangements, and shall include any benefits payable under
this Agreement.
C. Interest. In the event the Corporation does not make timely payment of the
Change of Control Termination amounts described in Section 6.1, Employee shall be entitled
to receive interest on any unpaid amount at the prime rate of interest (or such comparable
index as may be adopted) published from time to time by the Wall Street Journal.
D. Attorneys’ Fees. In the event Employee prevails in an action against the
Corporation to enforce or defend his rights under Article 6 of this Agreement, or to recover
damages for breach thereof, Employee shall be entitled to recover from the Corporation any
reasonable expenses for attorneys’ fees and disbursements incurred.
6.2) Definitions. For purposes of this Article 6, the following definitions shall be
applied:
A. “Continuing Directors” shall mean the directors of the Corporation as of the date of
Employee’s execution of this Agreement and any new director whose election to the Board of
Directors or nomination for election to the Board of Directors is approved by a vote of at
least two-thirds (2/3) of the directors as of the date of Employee’s execution of this
Agreement who are then still in office.
B. “Change of Control” shall mean any of the following events unless approved in
advance by a majority of the Continuing Directors:
1. The acquisition of direct or indirect beneficial ownership (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) in the aggregate of securities
of the Corporation representing twenty percent (20%) or more of the total combined
voting power of the Corporation’s then issued and outstanding securities by any
person or entity, or group of associated persons or entities acting in concert,
except for the officers and directors of the Corporation as of the date this
Agreement is executed; or
2. A merger or consolidation to which the Corporation is a party if the
individuals and entities who were shareholders of the Corporation immediately prior
to the effective date of such merger or consolidation have beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of less than fifty
percent
(50%) of the total combined voting power for election of directors of the surviving
corporation following the effective date of such merger or consolidation; or
10
3. The sale of the properties and assets of the Corporation, substantially as
an entirety, to any person or entity which is not a wholly-owned subsidiary of the
Corporation; or
4. A change in the composition of the Corporation’s Board of Directors at any
time after Employee’s execution of this Agreement such that the Continuing Directors
cease for any reason to constitute at least a fifty-one percent (51%) majority of
the Board.
C. “Change of Control Termination” shall mean with respect to Employee any of the
following events occurring within two (2) years after a Change of Control:
1. Termination of Employee’s employment by the Corporation for any reason other
than pursuant to Section 4.4(A) (a “Cause” termination); or
2. Termination of Employee’s employment by Employee pursuant to Section 6.1. A
Change of Control Termination by Employee shall not include termination by reason of
death or disability.
D. “Change of Control Good Reason” shall mean a good faith determination by Employee
that one or more of the following events has occurred, without Employee’s express written
consent, after a Change of Control:
1. A change in Employee’s reporting responsibilities, titles or position as in
effect immediately prior to the Change of Control, or any removal of Employee from,
or any failure to re-elect Employee to, any of such positions, which has the effect
of materially diminishing Employee’s responsibility or authority;
2. A material reduction by the Corporation in Employee’s total compensation as
in effect immediately prior to the Change of Control or as the same may be increased
from time to time;
3. The Corporation requiring Employee to be based anywhere other than within
fifty (50) miles of Employee’s job location at the time of the Change of Control;
4. Without replacement by a plan, program, or arrangement providing benefits to
Employee of the Corporation and its subsidiaries equal to or greater than those
discontinued or adversely affected, the failure by the Corporation to continue in
effect, within its maximum stated term, any pension, bonus, incentive, stock
ownership, purchase, option, life insurance, health, accident, disability, or any
other employee compensation or benefit plan, program or arrangement, in which
Employee is participating immediately prior to a Change of Control or the taking of
any action by
the Corporation that would adversely affect Employee’s participation or materially
reduce Employee’s benefits under any of such plans, programs or arrangements;
11
5. The taking of any action by the Corporation that would materially and
adversely affect the workplace environment existing at the time of the Change of
Control in or under which Employee performs his employment duties; or
6. The taking of any action by the Corporation that would materially change the
Corporation’s business strategies or practices existing at the time of the Change of
Control including, but not limited to, changes in the types and brands of products
offered, advertising and promotion programs, employment policies, and the segment to
which the Corporation markets its products.
ARTICLE 7
MISCELLANEOUS
MISCELLANEOUS
7.1) Severability. If any term or provision of this Agreement shall be held to be
invalid or unenforceable for any reason, such term or provision shall be ineffective to the extent
of such invalidity or unenforceability without invalidating the remaining terms or provisions of
this Agreement. Without in any way limiting the generality of the foregoing, in the event that any
provision of Article 5 hereof is held invalid or unenforceable by a court of competent
jurisdiction, the Corporation and Employee agree that that part should modified by the court to
make it enforceable to the maximum extent possible. If the part cannot be modified, then that part
may be severed and the other parts of this Agreement shall remain enforceable.
7.2) Section 409A Requirements. The Corporation and Employee recognize and agree that
revisions to the post-termination payments and benefits provisions contemplated by Section 4.4 and
Article 6 may be necessary and desirable to comply with the requirements of Internal Revenue Code
Section 409A, and the regulations, notices and other guidance of general application issued
thereunder (hereinafter, “409A Requirements”), in a manner intended to prevent any adverse tax
consequences to Employee and the Corporation as a result of any failure to so comply. Any such
revisions will be made only with the written consent of both parties; and each of them agrees to
cooperate in good faith to make any such revisions in a manner that timely complies with the 409A
Requirements.
7.3) Notices. Any notice required or permitted to be given under this Agreement shall
be sufficient, if given in person or if in writing, sent by certified mail, return receipt
requested, to the last known residence address in the case of Employee or to its principal office
in the case of the Corporation.
7.4) Waiver of Breach. The failure of either party hereto to enforce its rights under
any provision of this Agreement shall not operate or be construed as a waiver of such breach or of
any subsequent breach by any party.
12
7.5) Entire Agreement. This Agreement contains the entire agreement of the parties
concerning the employment of Employee by the Corporation and supersedes and replaces any prior
agreement or arrangement relative to Employee’s employment by the Corporation, whether oral or
written, including, but not limited to, any Prior Employment Agreement. Except as provided in
Section 7.1 of this Agreement, no modification, supplement, or amendment of any provision hereof
shall be valid unless made in writing and signed by the parties against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
7.6) Governing Law. This Agreement shall be construed and interpreted according to
the laws of the State of Minnesota.
7.7) Headings. The captions set forth in this Agreement are for convenience only and
shall not be considered a part of this Agreement or in any way limiting or amplifying the terms or
provisions hereof.
7.8) Obligations Which Survive Termination. The obligations and remedies of Sections
4.2, 4.3, 4.4, and Articles 5, 6 and 7 of this Agreement shall survive the termination of this
Agreement or any successor relationship and the termination of Employee’s employment for any
reason, except as expressly otherwise provided for in this Agreement.
7.9) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon Corporation and Employee and their respective successors, assigns, heirs, executors,
and administrators, except that the services to be performed by Employee are personal and are not
assignable.
7.10) Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered as of the day and year written below.
(The parties’ signatures appear on the following page.)
13
| XXXXXXX ELECTRONICS, INC. | ||
January 23, 2007
|
By /s/ Xxxxxx de Petra | |
Date
|
Its: Chairman | |
| EMPLOYEE | ||
January 23, 2007
|
/s/ Xxxxx Xxxxxxx | |
Date
|
Xxxxx Xxxxxxx |
14
EXHIBIT A
In consideration of the mutual covenants and undertakings set forth in the Employment
Agreement between Xxxxxxx Electronics, Inc., a Minnesota corporation (the “Corporation”), and Xxxxx
Xxxxxxx (“Employee”), the parties agree as follows:
1. Base Salary. For each fiscal year of the Corporation during Employee’s employment,
the Corporation shall pay Employee an annual base salary (“Base Salary”) in the amount determined
by the Compensation Committee of the Corporation’s Board of Directors, provided that such amount
shall not be less than the Base Salary for the immediately preceding fiscal year without the
consent of Employee unless such reduction is implemented as part of a broad-based employee cost
reduction initiative. For the fiscal year from January 1, 2007 through December 31, 2007,
Employee’s annual Base Salary shall be $181,500, payable in accordance with the Corporation’s usual
payroll schedule.
2. Bonus. The Corporation may, but is not obligated to, pay Employee an annual bonus
(“Annual Bonus”) consisting of stock options or a cash payment or both, the amounts of which, if
any, shall be determined by the Compensation Committee of the Board of Directors. If any Annual
Bonus is earned by Employee, it shall be paid within ninety (90) days after the end of the
Corporation’s applicable fiscal year.
3. Paid Time Off. Employee will be eligible to accrue up to a total of 248 hours (six
weeks and one day) of Paid Time Off (“PTO”) per fiscal year of the Corporation and will accrue such
PTO at the rate of 20.667 hours per each month of service. If Employee does not use all accrued
PTO during a fiscal year, he may carry over any unused PTO hours to the next fiscal year so long as
his maximum PTO accrual does not exceed a total of 340 hours (eight weeks and two and one-half
days). If Employee has reached the maximum accrual, no additional accrual will occur until
Employee has used sufficient PTO to drop below the maximum 340 hours. Employee will be paid for
accrued and unused PTO at termination. Employee’s entitlement to PTO as set forth in this
Paragraph 3 shall be in lieu of, and not in addition to, any PTO provided to employees by way of
the Corporation’s Employee Handbook or other Corporation policy.
4. Club Memberships. So long as the Corporation determines that such membership is
beneficial to Employee’s position as President and CEO of the Corporation, the Corporation will
purchase a xxxx club membership at a local hunting preserve.
5. Income Tax Preparation. The Corporation will pay the cost incurred by Employee for
preparation of his annual personal income tax returns.
5. Amendment. The Compensation Committee of the Board of Directors and/or another
designee of the Board reserves the right to modify, supplement and/or amend the terms of this
Exhibit A from time to time with written notice to Employee.
(The parties’ signatures appear on the following page.)
15
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to be duly executed and
delivered as of the day and year written below.
| XXXXXXX ELECTRONICS, INC. | ||
January 23, 2007
|
By /s/ Xxxxxx xxXxxxx | |
Date
|
Its: Chairman | |
| EMPLOYEE | ||
January 23, 2007
|
/s/ Xxxxx Xxxxxxx | |
Date
|
Xxxxx Xxxxxxx |
16
