EXHIBIT 10.4
SEVERANCE AND NONCOMPETITION
AGREEMENT
THIS AGREEMENT, by and between Xxxx International Holdings, Inc., a
Minnesota corporation with its principal offices at Anoka, Minnesota ("Xxxx")
and Xxxxx X. Xxxx of Xxxxxxx, Wisconsin (the "Executive"), is made and entered
into on of this 9th day of September, 1997.
WHEREAS, Executive has made a significant contribution to the
profitability, growth, and financial strength of Xxxx; and
WHEREAS, Executive has intimate knowledge of the business and affairs
of Xxxx, its policies, methods and personnel; and
WHEREAS, Xxxx recognizes the value of Executive's services to other
similar businesses engaged in the aftermarket for light truck and sport utility
vehicle exterior appearance accessories, to the detriment of Xxxx and its
shareholders; and
WHEREAS, it is in the best interests of Xxxx and its stockholders to
provide for the payment described in this Agreement in order to restrict the
employment of Executive in the aftermarket for light truck and sport utility
vehicle exterior appearance accessories; and
WHEREAS, Executive desires to enter into this Agreement to so restrict
his employment, in consideration for the payment and other benefits to be
provided herein.
THEREFORE, in consideration of the foregoing and other respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. Lump Sum Payment. As and for severance and in consideration for the
noncompetition and nondisclosure provisions of Sections 3 and 4 herein,
Executive shall be entitled to and Xxxx shall pay to Executive on the date of
the execution of this Agreement a lump sum payment in cash or other immediately
available funds as follows:(a) One Hundred Thousand and no/100 Dollars
($100,000), as and for severance; (b) Four Hundred Fifty Thousand and no/100
Dollars ($450,000), as and for the restrictions under Section 3 and 4 herein;
and (c) Fifty Thousand and no/100 Dollars ($50,000), as and for the mutual
release described in Section 10.
Before the execution of this Agreement, counsel to Xxxx shall provide
Executive with its opinion that no portion of the above payments constitute an
"excess parachute payment" within the meaning of Section 280G of the Internal
Revenue Code of 1986.
2. Payment in Addition to Other Benefits. Executive shall be entitled
to receive all benefits payable to Executive under any and all compensation,
bonus, stock option, welfare, pension, fringe benefit plan, program or practice
sponsored, maintained, or contributed to by Xxxx to the extent to which
Executive is entitled as of the date of this Agreement in accordance
with their respective terms, which shall be in addition to, and not reduced by,
any amounts payable to Executive under Section 1. Except with respect to
benefits as provided in the preceding sentence and for continuation and
conversion rights to certain benefits pursuant to Section 4980B of the Code
(COBRA) and applicable state law, Executive's participation in any such plan,
program or practice shall cease as of the date of this Agreement.
3. Nondisclosure. Executive acknowledges that during his employment
with Xxxx and/or its subsidiaries, he has occupied a position of trust and
confidence. Executive shall not, except as may be required by applicable law,
until such information shall have become public other than by Executive's
unauthorized disclosure, disclose to others or use, whether directly or
indirectly, any Confidential Information regarding Xxxx, its subsidiaries and
affiliates. "Confidential Information" shall mean information about Xxxx, its
subsidiaries and affiliates, and their respective suppliers and customers that
is generally understood by persons involved in the automotive aftermarket to be
confidential, trade secret and/or proprietary information of Xxxx and that was
learned by Executive in the course of his employment by Xxxx, its subsidiaries
and affiliates, including (without limitation) such information pertaining to
sales and marketing activities, customers, suppliers and vendors of unique
products or products the supply of which is so limited that diversion of such
products to others would materially constrain their supply to Xxxx, product
design and specifications, development of new products and inventions, pricing,
manufacturing processes unique to Xxxx, financial information (other than that
publicly disclosed by Xxxx), and management, financial conditions or business
plans. Executive acknowledges that such Confidential Information is specialized,
unique in nature and of great value to Xxxx, its subsidiaries and affiliates,
and that such information gives Xxxx, its subsidiaries and affiliates a
competitive advantage. Executive agrees to deliver or return to Lund, at Xxxx'x
request at any time as soon thereafter as possible, all documents, computer
tapes and disks, records, lists, data, drawings, prints, notes and written
information (and all copies thereof) furnished by Xxxx, its subsidiaries or
affiliates or prepared by Executive during the term of his employment by Xxxx,
its subsidiaries and affiliates.
4. Noncompetition. For a period of twelve (12) months following the
effective date of this Agreement, Executive agrees that he shall not at any
time, directly or indirectly, within the United States:
a. be employed by or provide advice or consulting services to, or
participate in (as owner, partner, stockholder, member,
venturer, director, governor, or the like) any business
engaged in the invention, design, development, marketing,
selling, distributing and/or manufacturing of products that
compete with products which are, on the date of this
Agreement, (i) listed in Xxxx'x current published catalogues,
(ii) under development by Xxxx or any of its subsidiaries or
affiliates, or (iii) under active negotiation by Xxxx or any
of its subsidiaries or affiliates to purchase the
manufacturing rights for from another company.
b. solicit or recruit any individual employed by Xxxx, its
subsidiaries or affiliates for the purpose of being employed
by him or by any entity on whose behalf he is acting as an
agent, representative or employee; or
c. influence or attempt to influence customers, suppliers, or
vendors of Xxxx or any of its subsidiaries or affiliates or
parties with which Xxxx or any of its subsidiaries or
affiliates do business, to divert their business away from
Xxxx, its subsidiaries or affiliates.
Notwithstanding anything in Sections 3 and 4 to the contrary, (1)
Executive's ownership, for strictly investment purposes, of less than five
percent (5%) of the capital stock of a publicly owned company shall not
constitute a violation of this Section 4; (2) nothing in this Agreement shall
limit Executive's right to be employed by, provide advice or consulting services
to, invest in, or otherwise participate in Xxxxx Automotive, Inc., provided
that, during the period covered by this Section, Xxxxx Automotive, Inc. does not
manufacture, market or distribute any products that duplicate any products which
are, on the date of this Agreement, described in paragraph (a)(i), (ii) or (iii)
of this Section 4 above.
5. Violation of Noncompete and Nondisclosure; Injunctive Relief. In the
event that Executive is determined, by a court of competent jurisdiction, to
have engaged in the conduct proscribed by either Sections 3 or 4 of this
Agreement, Executive agrees to repay the amount received pursuant to Section
1(b) of this Agreement. It is further expressly agreed that Xxxx will or would
suffer irreparable injury if Executive violated either Section 3 or 4 of this
Agreement and that Xxxx would by reason of such violation be entitled to
preliminary or injunctive relief in a court of competent jurisdiction, and
Executive further consents and stipulates to the entry of such preliminary or
injunctive relief in such a court upon an appropriate finding by such court that
Executive has violated either Sections 3 or 4.
6. Litigation Support. Executive agrees to cooperate fully, without
compensation, in all reasonable respects with Xxxx and its attorneys in
connection with Xxxx'x prosecution, defense or response to matters or actions in
which (a) Xxxx, its subsidiaries, affiliates, officers, directors or employees
are named in a Complaint, Cross-Complaint or counter claim as a defendant, (b)
allegations, claims or charges have been made or threatened against Executive
and/or Xxxx (or any of its subsidiaries) which relate to or involve Executive's
former duties as an employee or officer of Xxxx, or (c) Executive is or may be
either (i) entitled to indemnification from Xxxx pursuant to the Articles of
Incorporation or Bylaws of Xxxx or the Delaware General Corporation Law or (ii)
entitled to coverage under one or more directors' and officers' or other
insurance policies maintained at any time by Xxxx. Such cooperation shall
include, for example, Executive making himself available to Xxxx'x
representatives and to Xxxx'x attorneys for purposes of conferences, meetings,
compilation and communication of records and facts, and appearing as a witness
or prospective witness in connection with deposition or other testimony that may
be required in connection with such defense, provided, however, that Executive's
interest is not adverse to the interest of Xxxx, and provided further, that
Executive's availability be at such times and places that are mutually
convenient to Executive, Lund, Xxxx'x attorneys and plaintiff's attorneys. Xxxx
will reimburse Executive for all travel and other reasonable out-of-pocket
expenses relating to his attendance at conferences, meetings, depositions and
the like relating to the Litigation. In connection with his involvement in the
defense of the Litigation, Executive also understands and agrees that the
matters that Executive discusses with Xxxx and its attorneys are likely to be of
a confidential and privileged nature and Executive agrees to comply
with all instructions and advice provided to Executive by Xxxx and its attorneys
with respect to the confidential and privileged nature of such communications.
7. Indemnification. Xxxx will defend, indemnify and hold Executive (and
his legal representative or other successors) harmless from and against any
damages, claims, liabilities, losses and expenses (including without limitation
the payment of reasonable attorney's fees and expenses in advance of final
disposition of the proceedings) of any kind or nature whatsoever which may be
sustained or suffered by Executive in connection with or arising out of any
action, suit or proceeding to which he (or his legal representative or other
successors) may be made a party by reason of his being or having been a
director, officer or employee of Xxxx or any of its subsidiaries, his serving or
having served any other enterprise as a director, officer or employee at the
request of Xxxx, the disposition of Executive's shares in Xxxx, or the making of
this Agreement, to the fullest extent permitted by Delaware General Corporation
Law as in effect at the time of the subject act or omission, the Articles of
Incorporation and By-Laws of Xxxx as in effect at such time or on the date of
this Agreement, or any insurance policies Xxxx may elect to maintain generally
for the benefit of its directors and officers, whichever affords or afforded
greater protection to Executive; and Xxxx shall cause to be maintained in effect
for not less than six years from the date of this Agreement (to the extent
available) policies of directors' and officers' liability insurance covering
Executive of at least the same coverage as those maintained by Xxxx on the date
of this Agreement and containing terms and conditions which are no less
advantageous than such policies. The identification accorded Executive by this
Section 7 shall apply regardless of whether the claim giving rise to
indemnification is made against Executive in his capacity as a director, officer
or employee of Xxxx, or otherwise; provided, that the nature of the claim is
such that it could have been brought against Executive in his capacity as a
director, officer or employee of Xxxx. If any claim is made against Executive
for investment banking fees arising out of the disposition of Executive's shares
in Lund, Xxxx will defend, indemnify and hold Executive (and his legal
representatives or other successors) harmless from and against fifty percent
(50%) of any damages, claims, liabilities, losses and expenses (including,
without limitation, the payment of reasonable attorneys' fees and expenses in
advance of final disposition of the proceedings) which may be sustained or
suffered by Executive in connection with such claim. The preceding sentence is
not intended to acknowledge that Executive is obligated for any such investment
banking fees, and Xxxx and Executive affirm their belief that Executive has no
such obligation.
8. Confidentiality of Agreement. Executive and Xxxx agree to keep this
Agreement, including the contents thereof, in confidence and not to disclose the
terms of this Agreement to any third party without the written consent of the
other. However, nothing contained herein shall prevent (a) either party from
disclosing this Agreement or the terms thereof to their respective accountants
and attorneys and, in the case of Xxxx, to its employees and directors who have
a need to know of the existence and contents hereof; (b) Executive from
disclosing the terms of this Agreement to his spouse, to banks or other
financial institutions in connection with his obtaining loans or credit from
such entities, or to prospective employers who have made bonafide employment
offers to Executive, provided, however, that Executive shall first advise such
banks, financial institutions or prospective employers of the confidential
nature of this Agreement; or (c) Xxxx from disclosing the terms and conditions
of this Agreement or from
filing copies of this Agreement with any state or federal regulatory agencies,
including the Securities and Exchange Commission, if such disclosure or filing
of copies is considered by Xxxx as necessary or appropriate to comply with
federal or state securities laws or regulations or other legal or regulatory
requirements.
9. Resignations. Executive hereby resigns, effective as of the date of
this Agreement, as an officer and director of Xxxx and any and all of its
subsidiaries and affiliates.
10. Mutual Release. In consideration for the amount set forth in
Section 1(c) above and the other consideration contained therein, Executive and
Xxxx agree to execute a mutual release in the form attached hereto as Exhibit 1.
11. Press Release. Xxxx and Executive have agreed on the wording of a
press release regarding Executive's resignation, which is attached hereto as
Exhibit 2.
12. Future Statements. Executive and Xxxx and its subsidiaries and
affiliates agree that they will not engage in speech or actions which are
detrimental to the name and/or reputation of each other, nor make any
disparaging comments concerning each other, including the officers, directors,
agents, employees, and shareholders of Xxxx, its subsidiaries and affiliates,
except that this provision shall have no effect in the event a party hereto is
made the subject of any action commenced by the other party, its officers,
directors, agents, employees or shareholders in the future.
13. Successors. Xxxx will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Xxxx to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
Xxxx would be required to perform it if no such succession had taken place.
14. Binding Agreement. This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives, successors,
heirs, and designated beneficiaries. If Executive should die before the amount
would be payable to Executive hereunder if Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's designated beneficiaries, or, if
there is no such designated beneficiary, to Executive's estate.
15. No Mitigation. Executive shall not be required to mitigate the
amount of the payment provided for in Section 1 by seeking other employment or
otherwise, nor shall the amount of the payment provided for in Section 1 be
reduced by any compensation earned by Executive as the result of employment by
another employer or by retirement benefits after the date of payment, or
otherwise.
16. No Modification. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the parties. No waiver by either party hereto at any
time of any breach by the other party to this Agreement of, or compliance with,
any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or similar time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.
17. Attorneys' Fees. Xxxx shall also pay all legal fees and expenses
incurred by Executive in connection with the negotiation, drafting and execution
of this Agreement and the sale of Executive's Shares in Lund contemporaneous
hereto. Provided, however, Xxxx'x obligation under this Section shall not exceed
$30,000 in addition to amounts paid by Xxxx for such fees and expenses before
July 21, 1997.
18. Validity. It is the desire and the intent of the parties that the
provisions of Section 4 shall be enforceable to the fullest extent permissible
under applicable law and public policy. Accordingly, if Section 4 or any portion
thereof shall be adjudicated to be invalid or unenforceable whether because of
the duration and scope of the covenants set forth herein or otherwise, the
length and scope of the restrictions set forth in Section 4 shall be reduced to
the extent necessary so that this covenant may be enforced to the fullest extent
possible under applicable law.
The invalidity or unenforceability or any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
19. Withholding. Xxxx shall withhold from any amounts due and payable
to Executive by Xxxx under Section 1(a) and (c) the amount of any and all
withholding required under federal, state or local tax laws or regulations.
Executive shall be responsible for any state and federal taxes applicable to the
amounts due and payable to Executive under Section 1(b).
20. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the undersigned officer, on behalf of Xxxx
International Holdings, Inc., and Xxxxx X. Xxxx have hereunto set their hands as
of the date first above written.
XXXX INTERNATIONAL HOLDINGS, INC.
By: /s/ Xxxxxxx X. XxXxxxx
--------------------------------
Its Chief Executive Officer
EXECUTIVE:
/s/ Xxxxx X. Xxxx
-----------------------------------
Xxxxx X. Xxxx
EXHIBIT 1
MUTUAL RELEASE
As a material inducement to Xxxx to enter into this Release, Executive
hereby irrevocably and unconditionally releases, acquits and forever discharges
Xxxx, its officers, directors, agents, employees, shareholders, partners,
successors and assigns, individually and in their representative capacity, and
any entity affiliated with any of the foregoing, from any and all claims,
demands, obligations, damages, expenses, compensation and causes of action, of
any nature and from whatsoever source, whether known and unknown, whether based
in tort, contract or other theory of recovery, and whether for compensatory or
punitive damages, which Executive may have against any and all of them. Through
this Release, Executive extinguishes all causes of action against such persons,
including but not limited to any contract, wage or benefit claims; shareholder
claims; impairment of economic opportunity claims; intentional infliction of
emotional distress, defamation or any other tort claims; and all claims arising
from any federal, state or municipal law or ordinance. This Release extinguishes
any potential claims of employment discrimination arising from Executive's
employment with and separation from Xxxx, including specifically any claims
under the Minnesota Human Rights Act, the Americans With Disabilities Act, Title
VII of the Civil Rights Act of 1964, and the Age Discrimination in Employment
Act. Executive understands that this Release releases all known and unknown
claims against the Company and the other releases; provided, however, that
claims which arise out of a breach of this Agreement or claims which arise out
of any employee benefit plan under which Executive is entitled to benefits (as
set forth in the Severance and Noncompetition Agreement between Xxxx and
Executive dated September 9, 1997) are not released hereunder.
Under the Age Discrimination in Employment Act, Executive has 21 days
to review and consider this Release. If Executive executes this Release before
21 days elapsed from the date on which Executive first receives it (September 9,
1997) then Executive shall voluntarily waive his right to the full 21 day review
period. Executive has the right to rescind this Release within fifteen (15)
calendar days of the date upon which Executive signs it. If Executive desires to
rescind this Release, Executive must do so in writing and deliver it to Xxxx X.
Xxxxx, Xxxxxxx, Street and Deinard, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000, by hand or by mail within the 15-day period. If such rescission
is by mail, it must be postmarked within 15 calendar days of the date on which
Executive executes this Release and sent by certified mail, return receipt
requested.
As a material inducement to Executive to enter into this Release, Xxxx
and its subsidiaries and affiliates hereby irrevocably and unconditionally
release, acquit and forever discharge Executive from any and all claims,
demands, obligations, actions, damages, expenses, and compensation of any nature
and from whatever source, whether known or unknown, suspected or unsuspected,
whether based in tort, contract or other theory of recovery, and whether for
compensatory or punitive damages, on account of or in any way growing out of the
employment relationship between the parties, Executive's relationship as a
shareholder or director of Xxxx and its subsidiaries and affiliates, the making
of the Agreement of which this Release is a part or the sale of Executive's
shares in Xxxx. This Release releases all such claims
against Executive. Claims which arise out of a breach of the Agreement of which
this Release is a part are not released hereunder.
In the event this Release is rescinded pursuant to Minnesota Statutes,
Section 363.031, subd. 2, as provided in the accompanying notice, Executive
shall promptly repay to Xxxx an amount of Fifty Thousand Dollars and no/100
dollars ($50,000) and the mutual release provided herein shall be null and void
and of no further force or effect
XXXX INTERNATIONAL HOLDINGS, INC.
("XXXX")
By: /s/ Xxxxxxx X. XxXxxxx
---------------------------------------
Its Chief Executive Officer
XXXXX X. XXXX ("EXECUTIVE")
/s/ Xxxxx X. Xxxx
------------------------------------------
Xxxxx X. Xxxx
