MANAGEMENT AGREEMENT
AGREEMENT entered into as of September 28, 1998, by and between Xxxxxxx
Company, a Minnesota corporation (the "Company"), and Xxxxxx X. Xxxxxx (the
"Employee").
WITNESSETH:
WHEREAS, the Employee is a key member of the management of the Company and
has heretofore devoted substantial skill and effort to the affairs of the
Company, and the Board of Directors of the Company desires to recognize the
significant personal contribution that the Employee has made to further the best
interests of the Company and its stockholders; and
WHEREAS, it is desirable and in the best interests of the Company and its
stockholders to continue to obtain the benefits of the Employee's services and
attention to the affairs of the Company; and
WHEREAS, it is desirable and in the best interests of the Company and its
stockholders to provide inducement for the Employee (A) to remain in the service
of the Company in the event of any proposed or anticipated change in control of
the Company and (B) to remain in the service of the Company in order to
facilitate an orderly transition in the event of a change in control of the
Company; and
WHEREAS, it is desirable and in the best interests of the Company and its
stockholders that the Employee be in a position to make judgments and advise the
Company with respect to proposed changes in control of the Company without
regard to the possibility that Employee's employment may be terminated without
compensation in the event of certain changes in control of the Company; and
WHEREAS, the Employee desires to be protected in the event of certain
changes in control of the Company; and
WHEREAS, for the reasons set forth above, the Company and the Employee
desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the Company and the Employee agree as follows:
1. EMPLOYMENT. The Employee shall remain in the employ of the Company for
the term of this Agreement (the "Term"), and during the Term, the Employee
shall have such title, duties, responsibilities and authority, and receive such
remuneration and fringe benefits, as the Board of Directors of the Company shall
from time to time provide for the Employee; provided, however, that either the
Employee or the Company may terminate the employment of the Employee at any time
prior to the expiration of the Term, with or without Cause and for any reason
whatever, upon at least 30 days' prior written notice to the other party,
subject to the right of the Employee to receive any payment and other benefits
that may be due pursuant to the terms and conditions of paragraph 2 of this
Agreement.
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2. RIGHTS TO PAYMENT FOLLOWING CHANGE IN CONTROL. For purposes of this
paragraph 2, an "Event" shall be deemed to have occurred if:
A. a majority of the directors of the Company shall be persons other than
persons
(i) for whose election proxies shall have been solicited by the
Board of Directors of the Company or
(ii) who are then serving as directors appointed by the Board of
Directors to fill vacancies on the Board of Directors caused by
death or resignation (but not by removal) or to fill newly
created directorships,
B. 30% or more of the outstanding voting stock of the Company is acquired
or beneficially owned (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, or any successor rule thereto (the
"Exchange Act")) by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act),
provided, however, that the following acquisitions and beneficial
ownership shall not constitute Events pursuant to this paragraph 2B:
(i) any acquisition or beneficial ownership by the Company or a
subsidiary of the Company or
(ii) any acquisition or beneficial ownership by any employee benefit
plan (or related trust) sponsored or maintained by the Company
or one or more of its subsidiaries,
(iii) any acquisition or beneficial ownership by the Employee or any
group that includes the Employee, or
(iv) any acquisition or beneficial ownership by a parent corporation
or its wholly-owned subsidiaries, as long as they shall remain
wholly-owned subsidiaries, of 100% of the outstanding voting
stock of the Company as a result of a merger or statutory share
exchange which complies with paragraph 2C(i)(2) or the
exception in paragraph 2C(ii) hereof in all respects,
C. the shareholders of the Company approve a definitive agreement or plan
to
(i) merge or consolidate the Company with or into another
corporation (other than (1) a merger or consolidation with a
subsidiary of the Company or (2) a merger in which
(a) the Company is the surviving corporation,
(b) no outstanding voting stock of the Company (other than
fractional shares) held by shareholders immediately prior
to the merger is converted into cash, securities, or
other property (except (I) voting stock of a parent
corporation owning directly, or indirectly through
wholly-owned subsidiaries, both beneficially and of
record 100% of the voting stock of the Company
immediately after the merger or (II) cash upon the
exercise by holders of voting stock of the Company of
statutory dissenters' rights),
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(c) the persons who were the beneficial owners, respectively,
of the outstanding common stock and outstanding voting
stock of the Company immediately prior to such merger
beneficially own, directly or indirectly, immediately
after the merger, more than 70% of, respectively, the
then outstanding common stock and the then outstanding
voting stock of the surviving corporation or its parent
corporation, and
(d) if voting stock of the parent corporation is exchanged
for voting stock of the Company in the merger, all
holders of any class or series of voting stock of the
Company immediately prior to the merger have the right to
receive substantially the same per share consideration in
exchange for their voting stock of the Company as all
other holders of such class or series),
(ii) exchange, pursuant to a statutory exchange of shares of voting
stock of the Company held by shareholders of the Company
immediately prior to the exchange, shares of one or more
classes or series of voting stock of the Company for cash,
securities or other property, except for (a) voting stock of a
parent corporation of the Company owning directly, or
indirectly through wholly-owned subsidiaries, both beneficially
and of record 100% of the voting stock of the Company
immediately after the statutory share exchange if (I) the
persons who were the beneficial owners, respectively, of the
outstanding common stock and outstanding voting stock of the
Company immediately prior to such statutory share exchange own,
directly or indirectly, immediately after the statutory share
exchange more than 70% of, respectively, the then outstanding
common stock and the then outstanding voting stock of such
parent corporation, and (II) all holders of any class or series
of voting stock of the Company immediately prior to the
statutory share exchange have the right to receive
substantially the same per share consideration in exchange for
their voting stock of the Company as all other holders of such
class or series or (b) cash with respect to fractional shares
of voting stock of the Company or payable as a result of the
exercise by holders of voting stock of the Company of statutory
dissenters' rights,
(iii) sell or otherwise dispose of all or substantially all of the
assets of the Company (in one transaction or a series of
transactions), or
(iv) liquidate or dissolve the Company, unless a majority of the
voting stock (or the voting equity interest) of the surviving
corporation or its parent corporation or of any corporation (or
other entity) acquiring all or substantially all of the assets
of the Company (in the case of a merger, consolidation or
disposition of assets) or the Company or its parent corporation
(in the case of a statutory share exchange) is, immediately
following the merger, consolidation, statutory share exchange
or disposition of assets, beneficially owned by the Employee or
a group of persons, including the Employee, acting in concert,
or
D. (i) the Company enters into an agreement in principle or a
definitive agreement relating to an Event described in clause
A, B or C above which ultimately results in such an Event
described in clause A, B or C hereof,
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(ii) a tender or exchange offer or proxy contest is commenced which
ultimately results in an Event described in clause A or B
hereof, or
(iii) there shall be an involuntary termination or Constructive
Involuntary Termination of employment of Employee, and Employee
reasonably demonstrates that such event (x) was requested by a
third party that has previously taken other steps reasonably
calculated to result in an Event described in clause A, B or C
above and which ultimately result in an Event described in
clause A, B or C hereof or (y) otherwise arose in connection
with or in anticipation of an Event described in clause A, B or
C above that ultimately occurs.
If any Event shall occur during the Term of this Agreement, then the Employee
shall be entitled to receive from the Company or its successor (which term as
used herein shall include any person acquiring all or substantially all of the
assets of the Company) a cash payment and other benefits on the following basis
(unless the Employee's employment by the Company is terminated voluntarily or
involuntarily prior to the occurrence of the earliest Event to occur (the "First
Event"), in which case the Employee shall be entitled to no payment or benefits
under this paragraph 2):
(a) If at the time of, or at any time after, the occurrence of the First
Event and prior to the end of the Transition Period, the employment of
the Employee with the Company is voluntarily or involuntarily
terminated for any reason (unless such termination is a voluntary
termination by the Employee other than a Constructive Involuntary
Termination or is on account of the death or Disability of the
Employee or is a termination by the Company for Cause), the Employee
(or the Employee's legal representative, as the case may be), subject
to the limitations set forth in paragraph 2(e),
(i) shall be entitled to receive from the Company or its successor,
upon such termination of employment with the Company or its
successor, a cash payment in an amount equal to A) three times
the average annual compensation payable by the Company and
includible in the gross income for Federal Income Tax purposes
of the Employee during the shorter of the period consisting of
the most recent five completed taxable years of the Employee
ending before the First Event (other than an Event described in
clause D of this paragraph 2 unless the Employee is terminated
prior to the occurrence of an Event described in clause A, B or
C of this paragraph 2) or that portion of such period during
which the Employee was employed by the Company, less B $1.00,
such payment to be made to the Employee by the Company or its
successor in a lump sum at the time of such termination of
employment; and
(ii) shall be entitled until the end of the Transition Period to
participate in any health, disability and life insurance plan
or program in which the Employee was entitled to participate
immediately prior to the First Event as if he or she were an
employee of the Company until the end of the Transition Period
(except, with respect to health insurance coverage, for those
portions remaining until the end of the Transition Period that
duplicate health insurance coverage that is in place for the
Employee under any other policy provided at the expense of
another employer); provided however, that in the event that the
Employee's participation in any such health, disability or life
insurance plan or program is
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barred, the Company, at its sole cost and expense, shall
arrange to provide the Employee with benefits substantially
similar to those which the Employee is entitled to receive
under such plan or program.
(b) The payments provided for in this paragraph 2 shall be in addition to
any salary or other remuneration otherwise payable to the Employee on
account of employment by the Company or one or more of its
subsidiaries or its successor (including any amounts received prior to
such termination of employment for personal services rendered after
the occurrence of the First Event) but shall be reduced by any
severance pay which the Employee receives from the Company, its
subsidiaries or its successor under any other policy or agreement of
the Company in the event of involuntary termination of Employee's
employment.
(c) The Company shall also pay to the Employee all legal fees and expenses
incurred by the Employee as a result of such termination, including,
but not limited to, all such fees and expenses, if any, incurred in
contesting or disputing any such termination or in seeking to obtain
or enforce any right or benefit provided by this Agreement.
(d) In the event that at any time from the date of the First Event until
the end of the Transition Period,
(i) the Employee shall not be given substantially equivalent or
greater title, duties, responsibilities and authority or
substantially equivalent or greater salary and other
remuneration and fringe benefits (including paid vacation), in
each case as compared with the Employee's status immediately
prior to the First Event, other than for Cause or on account of
Disability,
(ii) the Company shall have failed to obtain assumption of this
Agreement by any successor as contemplated by paragraph 4(b)
hereof,
(iii) the Company shall require the Employee to relocate to any place
other than a location within twenty-five miles of the location
at which the Employee performed his duties immediately prior to
the First Event or, if the Employee performed such duties at
the Company's principal executive offices, the Company shall
relocate its principal executive offices to any location other
than a location within twenty-five miles of the location of the
principal executive offices immediately prior to the First
Event, or
(iv) the Company shall require that the Employee travel on Company
business to a substantially greater extent than required
immediately prior to the First Event,
a termination of employment with the Company by the Employee thereafter
shall constitute a Constructive Involuntary Termination.
(e) Notwithstanding any provision to the contrary contained herein except
the last sentence of this paragraph 2(e), if the lump sum cash payment
due and the other benefits to which the Employee shall become entitled
under paragraph 2(a) hereof, either alone or together with other
payments in the nature of compensation to the Employee which are
contingent on a change in the ownership or effective control of the
Company or in the ownership of a substantial portion of the assets of
the
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Company or otherwise, would constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986 (the
"Code") or any successor provision thereto, such lump sum payment
and/or such other benefits and payments shall be reduced (but not
below zero) to the largest aggregate amount as will result in no
portion thereof being subject to the excise tax imposed under
Section 4999 of the Code (or any successor provision thereto) or being
non-deductible to the Company for Federal Income Tax purposes pursuant
to Section 280G of the Code (or any successor provision thereto). The
Employee in good faith shall determine the amount of any reduction to
be made pursuant to this paragraph 2(e) and shall select from among
the foregoing benefits and payments those which shall be reduced. No
modification of, or successor provision to, Section 280G or
Section 4999 subsequent to the date of this Agreement shall, however,
reduce the benefits to which the Employee would be entitled under this
Agreement in the absence of this paragraph 2(e) to a greater extent
than they would have been reduced if Section 280G and Section 4999 had
not been modified or superseded subsequent to the date of this
Agreement, notwithstanding anything to the contrary provided in the
first sentence of this paragraph 2(e).
(f) The Employee shall not be required to mitigate the amount of any
payment or other benefit provided for in paragraph 2 by seeking other
employment or otherwise, nor (except as specifically provided in
paragraph 2(a)(ii)) shall the amount of any payment or other benefit
provided for in paragraph 2 be reduced by any compensation earned by
the Employee as the result of employment by another employer after
termination, or otherwise.
(g) The obligations of the Company under this paragraph 2 shall survive
the termination of this Agreement.
3. DEFINITION OF CERTAIN TERMS.
(a) As used herein, the term "person" shall mean an individual,
partnership, corporation, estate, trust or other entity.
(b) As used herein, the term "Cause" shall mean, and be limited to,
(i) willful and gross neglect of duties by the Employee or (ii) an act
or acts committed by the Employee constituting a felony and
substantially detrimental to the Company or its reputation.
(c) As used herein, the term "Disability" shall mean the Employee's
absence from his duties with the Company on a full time basis for 180
consecutive business days, as a result of the Employee's incapacity
due to physical or mental illness, unless within 30 days after written
notice pursuant to paragraph 1 hereof is given following such absence,
the Employee shall have returned to the full time performance of his
duties.
(d) As used herein, the term "voting stock" shall mean all outstanding
shares of capital stock entitled to vote generally in the election of
directors, considered for purposes of this Agreement as one class, and
all references to percentages of the voting stock shall be deemed to
be references to percentages of the total voting power of the voting
stock.
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(e) As used herein, the term "Transition Period" shall mean the three-year
period commencing on the date of the earliest to occur of an Event
described in clause A, B or C of paragraph 2 hereof (the "Commencement
Date") and ending on the third anniversary of the Commencement Date.
4. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of the
successors, legal representatives and assigns of the parties hereto;
provided, however, that the Employee shall not have any right to
assign, pledge or otherwise dispose of or transfer any interest in
this Agreement or any payments hereunder, whether directly or
indirectly or in whole or in part, without the written consent of the
Company or its successor.
(b) The Company will require any successor (whether direct or indirect, by
purchase of a majority of the outstanding voting stock of the Company
or all or substantially all of the assets of the Company, or by
merger, consolidation or otherwise), by agreement in form and
substance satisfactory to the Employee, to assume expressly and agree
to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior
to the effectiveness of any such succession (other than in the case of
a merger or consolidation) shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the
same amount and on the same terms as the Employee would be entitled
hereunder if the Employee terminated his employment on account of a
Constructive Involuntary Termination, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the date of termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid
which is required to execute and deliver the agreement provided for in
this paragraph 4(b) or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
5. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Minnesota.
6. NOTICES. All notices, requests and demands given to or made pursuant
hereto shall be in writing and shall be delivered or mailed to any such party at
its address which:
(a) In the case of the Company shall be:
Xxxxxxx Company
000 X. Xxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
(b) In the case of the Employee shall be:
Xxxxxx X. Xxxxxx
00 Xxxx Xxx Xxxx
Xxxxx Xxxx, XX 00000
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Either party may, by notice hereunder, designate a changed address. Any notice,
if mailed properly addressed, postage prepaid, registered or certified mail,
shall be deemed to have been given on the registered date or that date stamped
on the certified mail receipt.
7. SEVERABILITY; SEVERANCE. In the event that any portion of this
Agreement is held to be invalid or unenforceable for any reason, it is hereby
agreed that such invalidity or unenforceability shall not affect the other
portions of this Agreement and that the remaining covenants, terms and
conditions or portions hereof shall remain in full force and effect, and any
court of competent jurisdiction may so modify the objectionable provision as to
make it valid, reasonable and enforceable. In the event that any benefits to
the Employee provided in this Agreement are held to be unavailable to the
Employee as a matter of law, the Employee shall be entitled to severance
benefits from the Employer, in the event of an involuntary termination or
Constructive Involuntary Termination of employment of the Employee (other than a
termination on account of the death or Disability of the Employee or a
termination for Cause) during the term of this Agreement occurring at the time
of or following the occurrence of an Event, at least as favorable to the
Employee (when taken together with the benefits under this Agreement that are
actually received by the Employee) as the most advantageous benefits made
available by the Employer to employees of comparable position and seniority to
the Employee during the five-year period prior to the First Event.
8. TERM. This Agreement shall commence on the date of this Agreement and
shall terminate, and the Term of this Agreement shall end, on the later of
(A) December 31, 1998, provided that such period shall be automatically
extended for one year and from year to year thereafter until notice of
termination is given by the Employer or the Employee to the other party hereto
at least 60 days prior to December 31, 1998 or the one-year extension period
then in effect, as the case may be, or (B) if the Commencement Date occurs prior
to December 31, 1998 (or prior to the end of the extension year then in effect
as provided for in clause (A) hereof), the third anniversary of the Commencement
Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXXXX COMPANY
By
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Xxxxxx X. Xxxxxx
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