EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 31st day of July, 1998 by and between
Jer-Neen Manufacturing Co., Inc. (the "Employer") and Xxxxx X. Xxxx (the
"Executive").
W I T N E S S E T H :
WHEREAS, the Employer is a wholly owned subsidiary of Bio-Vascular, Inc.
("BVI");
WHEREAS, BVI formed the Employer with the name Jer-Neen Acquisition, Inc. in
order to facilitate the merger of Jer-Neen Manufacturing Co., Inc. ("Jer-Neen")
with and into the Employer (the "Merger) in accordance with the terms of that
certain Acquisition Agreement and Plan of Reorganization by and among BVI, the
Employer, Jer-Neen, Xxxxxx Xxxxxx, Jr., Xxxxxx Xxxxxxxx, Xxxxx Xxxx, Xxxxxxx
Xxxxx and Xxxxxxxxx Xxxxx (the "Merger Agreement");
WHEREAS, the name of the Employer was changed to Jer-Neen Manufacturing Co.,
Inc. in accordance with the terms of the Merger Agreement;
WHEREAS, the Executive was previously employed by Jer-Neen and the Employer
desires to secure the services of the Executive for and on behalf of the
Employer on the terms and subject to the conditions set forth herein; and
WHEREAS, each of the parties acknowledge that they are receiving good and
valuable consideration for entering into this Employment Agreement and Executive
acknowledges that this Employment Agreement, including the covenant not to
compete set forth hereinbelow, was negotiated between the parties hereto and
that Executive has received bargained for consideration in accordance with the
terms of the Merger Agreement including, without limitation, consideration for
his shares of Jer-Neen stock and other benefits resulting to Executive from the
terms and conditions of such employment, in exchange for entering into this
Employment Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
EMPLOYMENT AND TERM
1.1 EMPLOYMENT. Upon the terms and subject to the conditions herein contained,
the Employer hereby employs the Executive as President, and the Executive hereby
accepts such employment.
1.2 TERM. Except as otherwise provided in this Agreement, the original term of
this Agreement shall be three (3) years, commencing on the 31st day of July,
1998 (the "Commencement Date") and ending on the 30th day of July, 2001 (the
"Original Term")
whereupon this Agreement shall terminate and, except as otherwise provided
herein, neither the Employer nor the Executive shall have any further rights,
duties, privileges or obligations hereunder.
ARTICLE II.
COMPENSATION
2.1 BASE SALARY. In exchange for the provision of services, the Executive shall
receive a salary in the amount of One Hundred Thirty-two Thousand and 00/100
Dollars ($132,000.00) (the "Base Salary") payable in accordance with the
Employer's customary wage payment policies and practices for all Executives. The
Base Salary will be reviewed annually and may be adjusted, as approved by the
Board based upon criteria normally relevant to salary adjustments including,
without limitation, the Executive's performance, on the anniversary of the
Commencement Date.
2.2 CASH INCENTIVE BONUS. As an incentive to performance, Executive will be
eligible to earn an annual bonus of up to twenty percent (20%) of the
Executive's Base Salary for each calendar year in accordance with the criteria
provided in Exhibit A to this Agreement. The criteria in Exhibit A may be
adjusted from time to time by the Board in its sole discretion but upon
consultation with the Executive. The Board shall provide such earned bonus
payment for each fiscal year by December 31 of the next fiscal year. The
Executive's eligibility for a cash incentive bonus in accordance with the terms
of this Section 2.2 shall commence with the Employer's fiscal year beginning on
November 1, 1998. Executive will also be eligible to earn an annual bonus for
the fiscal year ending October 31, 1998 in accordance with the terms and
conditions of Jer-Neen's annual bonus program, provided, that the determination
of the Executive's entitlement to such bonus shall be made by the Chief
Executive Officer of BVI.
2.3 BENEFITS. Executive shall be entitled to participate in any profit sharing
plan, life insurance, health insurance, dental insurance, disability insurance
or any other fringe benefit which the Employer may from time to time make
available to its Executives. Any additional fringe benefits to Executive shall
be determined and approved by the Board of Directors of Employer in amounts that
are commensurate with services rendered.
2.4 VACATION. The Executive will be entitled to earn fifteen (15) business days
of annual vacation proratably throughout the year beginning on the commencement
date. It is acknowledged that in computing the years of service to Employer for
purposes of the Employer's vacation policy, Executive has been given credit for
his previous four (4) years of service with Jer-Neen. Any increases in
Executive's paid annual vacation shall be in conformity with the currently
existing vacation policy of the Employer.
2.5 SEVERANCE PAYMENT AND BENEFITS UPON TERMINATION. In the event that
Executive's employment is terminated by the Employer for reasons other than (i)
cause as
-2-
defined in Paragraph 4.1 of this Agreement, or (ii) a change in control as
defined in the Change in Control Agreement attached hereto as Exhibit B (the
"Change in Control Agreement"), the Executive shall receive:
(a) a cash severance payment equal to the difference between the
amount of Base Salary the Executive was actually paid between
the date of this Agreement and the date of the Executive's
termination of employment, and the total amount of Base Salary
that Executive was entitled to receive pursuant to the terms of
this Agreement if the Executive were employed for the full
amount of the Original Term (the "Termination Payment"). This
Termination Payment will be payable in equal payments during the
period between the date of the Executive's termination and the
expiration of the Original Term (the "Severance Term") in
accordance with the Employer's customary wage payment policies
and practices and shall be subject to federal and state tax
withholding and FICA.
(b) The Employer will also provide to the Executive, at the
Employer's expense, group medical and dental insurance during
the Severance Term in an amount equal to that portion of such
benefits that the Employer paid the Executive for such benefits
immediately preceding the date of the Executive's termination
(the "Employer Contribution Amount"), it being acknowledged and
agreed that such Employer Contribution Amount will be paid
directly to the Employer's insurer for any such benefits to be
paid during the first eighteen months following the date of
termination of Employment and, if necessary, directly to the
Executive thereafter.
(c) In addition to the group medical and dental paid to Executive
during the Severance Term, subject to the condition that the
Employer's disability insurance plan permits such participation
by the Executive, the Employer will provide to the Executive
during the Severance Term, at the Employer's expense, in an
amount equal to the Employer Contribution Amount, group
disability insurance. However, nothing herein obligates the
Employer to modify or amend in any manner whatsoever its
disability insurance plan to accommodate the Executive, although
the Employer may make such modifications or amendments, at its
sole discretion, if it is consistent with the Employer's
developing employment policies.
(d) In addition to the group medical, dental and disability benefits
paid to the Executive during the Severance Term, subject to the
condition that the applicable Employer's plans permit such
participation by the Executive, the Employer will provide to the
Executive, at the Employer's expense, in an amount equal to the
Employer Contribution Amount, group medical, dental, life and
disability insurance for the period between the expiration date
of the Severance Term and the later date of (i) the third
anniversary of the date of the termination of the Executive's
employment or (ii) the date the Executive has attained age 62.
-3-
However, nothing herein obligates the Employer to modify or
amend in any manner whatsoever its health, dental, life and
disability insurance plans to accommodate the Executive,
although the Employer may make such modifications or amendments,
at its sole discretion, if it is consistent with the Employer's
developing employment policies.
Notwithstanding any other provision of this Section 2.5, in the event the
Severance Term is less than six (6) months and the employment of the Executive
is terminated as provided in the first paragraph of this Section 2.5, the
Executive shall receive (i) six (6) months of Base Salary as of the date of
termination of employment in equal payments over the six month period in
accordance with the Employer's customary wage payment practices and policies,
and (ii) six (6) months of group medical, dental and disability insurance at the
Employer Contribution Amount.
It is specifically acknowledged and agreed that (i) in the event Executive
resigns, Executive shall not be entitled to any Termination Payment, and (ii) in
the event Executive's employment is terminated by the Employer for any reason,
Executive shall not be entitled to a pro-rata cash incentive bonus as provided
in Section 2.2 of this Agreement.
In consideration for the payments provided in this Section 2.5, Executive agrees
to execute a release of any and all claims against the Employer, at the time of
termination of the Executive's employment, the release to be in such reasonable
form as prepared by the Employer.
2.6. RESTRICTED STOCK COMPENSATION. The Employer hereby grants to the Executive
that number of shares BVI common stock as determined by (a) multiplying the
Executive's Base Salary on the Commencement Date by 10%, then (b) multiplying
such amount by the sum of 3 plus the number of months remaining in fiscal year
1998 divided by 12, then (c) dividing such amount by the closing bid price
(hereinafter, the "Stock Price") of BVI common stock on the Commencement Date.
Such stock shall vest in four (4) installments on each of October 31, 1998,
1999, 2000 and 2001, as long as the Executive continues to be employed by the
Employer. The number of shares to vest on October 31, 1998 shall be the product
of (a) 10% of the Executive's Base Salary on the Commencement Date multiplied by
(b) the ratio of the number of months remaining in fiscal year 1998 by 12. The
remainder of such stock shall vest in three (3) equal installments on October
31, 1999, 2000 and 2001. Such stock will contain such restrictions or other
provisions as are applicable to other similarly circumstanced Executives issued
restrictive stock as part of their compensation plans.
2.7. STOCK OPTIONS.
(a) The Employer hereby grants to the Executive an option to
purchase that number of shares of BVI common stock as determined
by (a) multiplying the Executive's Base Salary on the
Commencement Date by 20%, then (b) multiplying such
-4-
amount by the sum of 3 plus the number of months remaining in
fiscal year 1998 divided by 12, then (c) dividing such amount by
the Stock Price of BVI common stock on the Commencement Date.
Such option shall become exercisable in four increments on
October 31, 1998, 1999, 2000 and 2001, as long as the Executive
continues to be employed by the Employer. The number of shares
to become exercisable on October 31, 1998 shall be determined by
multiplying 20% of the Executive's Base Salary on the
Commencement Date by a fraction, the numerator of which is the
number of months remaining in fiscal year 1998, and the
denominator of which is 12. The remainder of such options will
become exercisable in equal installments on October 31, 1999,
2000 and 2001. The terms of the option will be governed by a
separate stock option agreement to be delivered at the time the
option is granted.
(b) On the Commencement Date the Employer will grant to the
Executive an option to purchase 7,000 shares of BVI common
stock. The terms of the option will be governed by a separate
stock option agreement to be delivered at the time the option is
granted. The option shall become exercisable on the fourth
anniversary of the Commencement Date, as long as the Executive
is employed by the Employer on the fourth anniversary of the
Commencement Date.
2.8. CHANGE IN CONTROL. The Executive shall be entitled to certain benefits upon
a change in control as defined in and in accordance with the terms of the Change
in Control Agreement attached hereto as Exhibit B.
-5-
2.9 REIMBURSEMENT OF EXPENSES. The Employer shall reimburse the Executive for
all reasonable, ordinary and necessary expenses incurred by him in the
performance of his duties hereunder and the Executive shall account to the
Employer therefor in the manner normally prescribed by the Employer for
reimbursement of Executive expenses.
ARTICLE III.
DUTIES OF EXECUTIVE
3.1 SERVICES. The Executive shall perform all duties and obligations charged to
the Executive by the Board of Directors of the Employer, as the same may be
determined from time to time, provided, however, that it is acknowledged and
agreed that the President and Chief Executive Officer of BVI shall direct the
Executive's day-to-day activities. The Board shall assure adequate time,
resources and authority for the Executive to achieve goals mutually agreed upon
by the Employer and the Executive.
3.2 TIME AND EFFORT. The Executive shall devote his full time and effort to the
business of the Employer, provided, however, that Executive shall be allowed to
continue to serve as both (i) a member of an advisory group for U.M.C., Inc., a
private machine shop and (ii) a director of INNOVATIVE CUISINE, INCORPORATED
d/b/a FIVE STAR FOOD BASE COMPANY. The Executive shall perform the duties and
obligations required of the Executive hereunder in a competent, efficient and
satisfactory manner at such hours and under such conditions as the performance
of such duties and obligations may require.
3.3 ARTICLES AND BY-LAWS. The Executive shall act in accordance with and so as
to abide by the Articles of Incorporation of the Employer, the Bylaws of the
Employer and all decisions of the Board of Directors of the Employer.
3.4 CONFIDENTIALITY AND LOYALTY. Executive acknowledges that, during the course
of his employment he has produced and may produce and have access to material,
records, data and information not generally available to the public
("Confidential Information") regarding the Employer, its customers and
affiliates. Accordingly, during and subsequent to the termination of this
Agreement, Executive shall hold in confidence and not directly or indirectly
disclose, use, copy or make lists of any such confidential information, except
to the extent authorized in writing by the Employer, or as required by law or
any competent administrative agency or as otherwise is reasonably necessary or
appropriate in connection with the performance by Executive of his duties
pursuant to this Agreement. Upon termination of his employment under this
Agreement, Executive shall promptly deliver to the Employer (i) all records,
manuals, books, documents, letters, reports, data, tables, calculations and all
copies of any of the foregoing which are the property of Employer or which
relate in any way to the customers, business, practices or techniques of the
Employer and (ii) all other property of Employer and Confidential Information
which in any of these cases are in his possession or
-6-
under his control. Executive agrees to abide by the Employer's reasonable
policies as in effect from time to time, respecting avoidance of interests
conflicting with those of the Employer.
3.5 COVENANT NOT TO COMPETE. In exchange for the consideration (i) received by
the Executive in accordance with the terms of the Merger Agreement and (ii)
given by Employer to Executive pursuant to this Agreement, specifically
including, but not limited to, the Severance Payment provided in Section 2.5 of
this Agreement, Executive agrees, represents to and covenants with the Employer
that during the period of Executive's employment by or with Employer, and for
the longer of (i) a period of one (1) year immediately following the termination
of Executive's employment with Employer under this Agreement or otherwise, and
(ii) ten (10) years following the Closing Date (as such term is defined in the
Merger Agreement), for any reason whatsoever, either directly or indirectly, for
himself or on behalf of or in conjunction with any other person, persons,
Employer, partnership, corporation or business of whatever nature violate the
noncompetition covenants of Article IX of the Merger Agreement, which are hereby
incorporated by reference in this Agreement in their entirety.
3.6. CREATIONS. Subject to Executive's rights under Minnesota Statutes ss.
181.78, Executive hereby agrees that every idea, concept, invention and
improvement (whether patented or not) conceived by Executive and all copyrighted
or copyrightable matter created by Executive that relates to the Employer's
business (collectively, "Creations") shall be the property of the Employer (or
its designee). Executive shall communicate promptly and disclose to the
Employer, in such form as the Employer may request, all information, details and
data pertaining to each Creation. Every copyrightable Creation, regardless of
whether copyright protection is sought or preserved by the Employer, shall be a
"work for hire" as defined in 12 U.S.C. ss. 101 and the Employer shall own all
rights in and to such matter throughout the world, without the payment of any
royalty or other consideration to Executive or anyone claiming through
Executive.
Executive shall execute and deliver to the Employer such formal transfers and
assignments and such other documents as the Employer may request to confirm and
protect the Employer's rights hereunder. Any idea, copyrightable matter or other
property relating to the Employer's business and disclosed by Executive or
discovered by the Employer prior to the first anniversary of the date of the
Executive's termination of employment (the "Termination Date") shall be deemed
to be governed hereby unless proved by Executive to have been first conceived
and made after the Termination Date.
3.7 CONFIDENTIALITY AND XXXXXXX XXXXXXX AGREEMENTS. Concurrently with the
execution of this Agreement, Executive agrees to execute and deliver to the
Employer (i) the Executive Patent and Confidential Information Agreement and
(ii) the Statement of Policy regarding Xxxxxxx Xxxxxxx attached hereto as
Exhibits C and D, respectively.
3.8 REMEDIES. Executive agrees and understands that any breach of any of the
covenants
-7-
or agreements set forth in this ARTICLE III of this Agreement will cause the
Employer irreparable harm for which there is no adequate remedy at law, and,
without limiting whatever other rights and remedies Employer may have under this
paragraph, Executive consents to the issuance of an injunction in favor of the
Employer enjoining the breach of any of the aforesaid covenants or agreements by
any court of competent jurisdiction. If any or all of the aforesaid covenants or
agreements are held to be unenforceable because of the scope or duration of such
covenant or agreement or the area covered thereby, the parties agree that the
court making such determination shall have the power to reduce or modify the
scope, duration and/or area of such covenant to the extent that allows the
maximum scope, duration and/or area permitted by applicable law.
ARTICLE IV.
TERMINATION
4.1 TERMINATION FOR CAUSE. Notwithstanding anything contained in this Agreement
to the contrary, the Employer shall have the right to terminate the employment
of the Executive upon the occurrence of any of the following events:
(a) The commission in the course of the Executive's employment by
the Employer of any fraudulent act;
(b) Conviction of a felony (from which, through lapse of time or
otherwise, no successful appeal shall have been made) whether or
not committed in the course of his employment by the Employer;
(c) The willful refusal to carry out reasonable instructions of the
Board; provided, however, that the Executive may only be
discharged after he shall have been given 30 days written notice
setting forth his alleged deficiencies and that he shall not,
within such 30-day period, have ceased or otherwise cured the
activity or activities or omission constituting the grounds for
termination;
(d) The willful disclosure of any trade secrets or confidential
corporate information of the Employer or BVI to persons not
authorized to know same, unless such disclosure is required by
any law or court order or similar process; and
(e) Inability of the Executive to perform the essential functions of
his duties in accordance with the terms of this Agreement, with
or without reasonable accommodation.
Where the employment of the Executive is terminated pursuant to this Article IV,
Section 4.1 of this Agreement, such termination shall be effective upon the
delivery of notice thereof to the
-8-
Executive.
4.2 DEATH OF EXECUTIVE. In the event of Executive's death during the term of
this Agreement, this Agreement and the Employer's and the Executive's rights and
obligations under this Agreement shall terminate.
4.3 RESIGNATION OF EXECUTIVE. Executive may resign at any time for any reason
upon sixty (60) days advance written notice to the Chairman of the Board of
Directors provided that the Employer's obligations to the Executive, pursuant to
the terms of this Agreement, shall cease on the date the Executive's termination
is effective.
4.4. SURVIVING RIGHTS. Notwithstanding the termination of the Executive's
employment, the parties shall be required to carry out any provisions hereof
which contemplate performance subsequent to such termination; and such
termination shall not affect any liability or other obligation which shall have
accrued prior to such termination, including, but not limited to, any liability
for loss or damage on account of a prior default.
-9-
ARTICLE V.
SETTLEMENT BY ARBITRATION
5.1 Arbitration Employer and Executive agree that any claim or controversy that
arises out of or relates to this Agreement, or the breach of it by either party,
will be settled by arbitration in the City of St. Xxxx, Minnesota in accordance
with the rules of the American Arbitration Association.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION. Executive shall be entitled to indemnification and
advancement of expenses by reason of Executive's status with the Employer to the
fullest extent permitted under the laws of the State of Minnesota and the
Articles of Incorporation and bylaws of the Employer, and likewise, shall be
entitled to indemnification and advancement of expenses by reason of Executive's
status with Employer to the fullest extent permitted under the laws of the State
of Minnesota and Articles of Incorporation and bylaws of Employer. The Employer
represents to the Executive that as of the date hereof there is no provision of
the Articles of Incorporation or bylaws of the Employer that prohibits or limits
indemnification or advances of expenses or imposes conditions on indemnification
or advances of expenses in addition to the conditions set forth in Minnesota
law.
ARTICLE VII.
GENERAL PROVISIONS
7.1 NOTICES. All notices, requests, and other communications shall be in writing
and except as otherwise provided herein, shall be considered to have been
delivered if personally delivered or when deposited in the United States Mail,
first class, certified or registered, postage prepaid, return receipt requested,
addressed to the proper party at its address as set forth below, or to such
other address as such party may hereafter designate by written notice to the
other party:
(a) If to the Employer, to: M. Xxxxx Xxxxxx
Bio-Vascular, Inc.
0000 Xxxxxxxxxx Xxxxxx
Xx. Xxxx, XX 00000-0000
With a copy to: Xxxxxxx X. Xxxx, Esq.
Winthrop & Weinstine
0000 Xxxx Xxxxxxxx Xxxxx
-00-
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
(b) If to the Executive, to: Xxxxx X. Xxxx
0000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
With a copy to: Xxxxx X. Xxxxx
1100 International Centre
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
7.2 WAIVER, MODIFICATION OR AMENDMENT. No waiver, modification or amendment of
any term, condition or provision of this Agreement shall be valid or of any
effect unless made in writing, signed by the party to be bound or its duly
authorized representative and specifying with particularity the nature and
extent of such waiver, modification or amendment. Any waiver by any party of any
default of the other shall not effect, or impair any right arising from, any
subsequent default. Nothing herein shall limit the rights and remedies of the
parties hereto under and pursuant to this Agreement, except as hereinbefore set
forth.
7.3 ENTIRE AGREEMENT. This Agreement contains the entire understanding of the
parties hereto in respect of transactions contemplated hereby and supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
7.4 INTERPRETATION AND SEVERANCE. The provisions of this Agreement shall be
applied and interpreted in a manner consistent with each other so as to carry
out the purposes and intent of the parties hereto, but if for any reason any
provision hereof is determined to be unenforceable or invalid, such provision or
such part thereof as may be unenforceable or invalid shall be deemed severed
from this Agreement and the remaining provisions shall be carried out with the
same force and effect as if the severed provision or part thereof had not been a
part of this Agreement.
7.5 GOVERNING LAW. This Agreement shall be construed and enforced in accordance
with the laws of the State of Minnesota.
7.6 SUCCESSORS AND ASSIGNS/OBLIGATIONS OF EMPLOYER. This Agreement shall be
binding upon the Employer and its successors and assigns and shall inure to the
benefit of the Executive and the Executive's heirs, executors and
administrators.
7.7 IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which shall constitute one and the same Agreement.
-11-
7.8 BVI GUARANTEE. BVI guarantees any and all obligations of the Employer in
accordance with the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
JER-NEEN MANUFACTURING CO., INC.
By ___________________________
Its __________________________
BIO-VASCULAR, INC.
By ___________________________
Its __________________________
EXECUTIVE:
_______________________________
Xxxxx X. Xxxx
-00-
XXXXXXX A
Allocation of Annual Cash Incentive to be paid to Executive in accordance with
Section 2.2 of Executive's Employment Agreement to which this Exhibit A is
attached hereof.
PERCENT
ALLOCATION
Achievement of Personal Management by Objectives
("MBO") Goals as determined by the Employer 20%
Employer Performance Goals:
Operating Income 40%
Net Revenue 40% 80%
--- ---
Total Allocation 100%
===
For example, without limitation, assuming a Base Salary of $100,000 and the
Board determines that Executive has met all his MBO goals and the Employer has
met its Operating Income and Net Revenue goals, then Executive would receive
$20,000 ($100,000 X 20%). However, if the Board determines that the Executive
has met all his MBO goals, and the Employer has not met 100% of its Operating
Income and its Net Revenue goals, the Executive would receive $4,000 ($100,000 X
20% X 20%), only that incentive due related to MBO's. Likewise, if the Board
determines that the Executive has met only 75% of his MBO goals (and the
Employer has not met either of its Performance Goals) the Executive would
receive $3,000 (100,000 x 20% x 20% x75%).
-13-
