CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement"), dated as of August 26,
1999 between The Procter & Xxxxxx Company, an Ohio corporation and/or its
affiliates, ("P&G") and Xxxxx Xxxxxxxx ("Xxxxxxxx").
Purpose
Recovery Engineering, Inc. ("REI") has entered into an Agreement and
Plan of Merger (the "Merger Agreement") with The Procter & Xxxxxx Company and
Xxxxxxx, Inc. ("Xxxxxxx"), a wholly owned subdiary of The Procter & Xxxxxx
Company, dated as of August 26, 1999, pursuant to which, at the "Effective Time"
(as defined in the Merger Agreement), REI shall merge with Xxxxxxx (the
"Merger"); and
Xxxxxxxx is the Chief Executive Officer of REI and shall receive
significant payments and benefits by reason of the consummation of the Merger,
and is desirous that the Merger be so consummated; and
P&G desires Xxxxxxxx to provide certain consulting services to P&G and
Xxxxxxxx is willing to provide such services to P&G on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Retention as a Consultant. P&G shall retain Xxxxxxxx and Xxxxxxxx
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shall serve P&G as a consultant, on the terms and conditions set forth herein.
2. Term. Xxxxxxxx shall be so retained for the period commencing as
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of the Effective Time and ending upon the payment of the Second Milestone (as
defined below), unless terminated earlier pursuant to this Agreement (the
"Consulting Term"). The Consulting Term may be terminated by either party
("Non-breaching Party) if the other party breaches its obligations under this
Agreement ("Breaching Party") upon ten (10) days' prior written notice, unless
the Breaching party cures such breach within such ten (10) day period. If P&G
terminates the Consulting Term, P&G shall have no obligations to Xxxxxxxx other
than to pay the portion of the Fee (defined below), if any, which is accrued and
unpaid as of the date of termination.
3. Duties. During the Consulting Term, Xxxxxxxx shall render
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consulting services to P&G with respect to the project involving [Confidential]
generally outlined in Attachment 1 (the "Project"). In performing his duties,
Xxxxxxxx shall deliver the following milestones as part of the Project:
(a) [Confidential]
(b) [Confidential]
Xxxxxxxx shall be accountable to X. X. Xxxxxx or his designee for the
Project and Xxxxxxxx shall report his progress on the Project to such person on
a regular basis. P&G shall provide Xxxxxxxx with reasonable resources,
consistent with REI past practices, to assist him in fulfilling his duties
within the time frames contemplated in this Section 3.;
4. Place of Performance. Xxxxxxxx shall perform his duties hereunder
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at REI's 00xx Xxxxxx facility in Minneapolis, Minnesota or such other place as
reasonably agreed by the parties.
5. Compensation and Related Matters. As full and complete
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compensation for the services to be rendered by Xxxxxxxx hereunder P&G shall
make the following payments to Xxxxxxxx:
(a) Consulting Fees. Subject to Section 2 hereof, in consideration
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for Xxxxxxxx providing consulting services hereunder, P&G shall pay Xxxxxxxx
$500,000 at the First Milestone and $500,000 at the Second Milestone if they are
completed within the period set forth above for the entire Consulting Term (the
"Fee"). Payments shall be made within fifteen (15) days of P&G's receipt of
Xxxxxxxx'x invoice for services rendered.
(b) Reimbursement of Expenses. P&G shall reimburse Xxxxxxxx for
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reasonable business expenses incurred in the performance of Xxxxxxxx'x duties
hereunder upon submission of reasonably satisfactory documentation in accordance
with the general policies of P&G.
(c) Withholding. Consultant acknowledges that he is not an "employee"
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(or person of similar status) of P&G or any of its affiliates for purposes of
the Internal Revenue Code of 1996, as amended (the "Code"), and participation in
any and all employee benefit plans of P&G or any of its affiliates. Xxxxxxxx
waives any rights he may have to participate in any employee, fringe benefit or
other similar plan of P&G or any of its affiliates. Consultant acknowledges
that he will not be paid any "wages" (as defined in the Code) hereunder and that
Xxxxxxxx shall be solely responsible for all taxes imposed on him by reason of
any compensation, benefits or other amounts payable hereunder.
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6. Unauthorized Disclosure. Xxxxxxxx agrees and understands that in
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connection with the performance of services hereunder , Xxxxxxxx has been and
will be exposed to and receive information regarding the business and affairs of
P&G and its affiliates. Xxxxxxxx agrees that during the Consulting Term and
thereafter, he will not (x) use any of such information for himself or for any
person, firm, corporation, partnership or other entity or (y) disclose any of
such information to any person, firm, corporation, partnership or other entity.
This confidentiality covenant has no temporal, geographical or territorial
restriction. Xxxxxxxx agrees and understands that the provisions of this
Section 6 are reasonable and necessary to prevent the improper use or disclosure
of confidential information of P&G or its affiliates.
7. Proprietary Rights. Xxxxxxxx represents and warrants that all
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patents, patent applications, rights to inventions, copyright registrations and
other license, trademark and trade name rights heretofore owned by Xxxxxxxx and
relating to the business of P&G or any of its subsidiaries have been duly
transferred to such corporation. Xxxxxxxx shall disclose promptly to P&G any
and all inventions, discoveries, improvements and patentable or copyrightable
works initiated, conceived or made by him, either alone or in conjunction with
others, during the Consulting Term and related to the business or activities of
P&G and/or its subsidiaries and he assigns all of his interest therein to P&G or
its nominee. Whenever requested to do so by P&G, Xxxxxxxx shall execute any and
all applications, assignments or other instruments which P&G shall deem
necessary to apply for and obtain trademarks, patents or copyrights of the
United States or any foreign country or otherwise protect P&G's and/or its
subsidiaries' interest therein. These obligations shall continue beyond the
conclusion of the Consulting Term with respect to inventions, discoveries,
improvements or copyrightable works initiated, conceived or made by Xxxxxxxx
during the Consulting Term and shall be binding upon Xxxxxxxx'x employers,
assigns, executors, administrators and other legal representatives.
8. Non-Waiver of Rights. The failure to enforce at any time the
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provisions of this Agreement or to require at any time performance by any other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Agreement or
any part hereof, or the right of any party to enforce each and every provision
in accordance with its terms.
9. Return of Company Property. Xxxxxxxx agrees to return to P&G
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immediately upon termination of the Consulting Term all documents, files, and
other property of any kind belonging to P&G. Upon Xxxxxxxx'x request, P&G shall
provide Xxxxxxxx a receipt for such returned property.
10. Binding Effect/Assignment. This Agreement shall inure to the
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benefit of and be binding upon the parties hereto and their respective heirs,
executors, personal representatives, estates, successors (including, without
limitation, by way of merger) and assigns. Notwithstanding the provisions or
the immediately preceding sentence, Xxxxxxxx shall not assign all or any portion
of this Agreement without the prior written consent of P&G.
11. Notice. For the purposes of this Agreement, notices, demands and
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all other communications provided for in this Agreement shall be in writing and
shall be deemed to
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have been duly given when delivered or (unless otherwise specified) mailed by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to Xxxxxxxx:
Xxxxx Xxxxxxxx
0000 Xxxxxx Xxxx
Xxxxxx, XX 00000
If to P&G:
0 Xxxxxxx & Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Vice President - Corporate New Ventures
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
12. Dispute Resolution. Any disputes under this Agreement shall be
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arbitrated pursuant to the rules of the American Arbitration Association in
Minneapolis, Minnesota.
13. Modification of Agreement; Governing Law. No provision of this
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Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by the parties hereto. No
waiver by either party hereto at any time of any breach by the other party
hereto, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar of dissimilar
provisions or conditions at the same or at any prior or subsequent time. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Minnesota without regard to its
conflicts of law principles.
14. Severability. If any provision of this Agreement, or any
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application thereof to any circumstances, is invalid, in whole or in part, such
provision or application shall to that extent be severable and shall not affect
other provisions or applications of this Agreement.
15. Counterparts. This Agreement may be executed in one or more
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counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
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16. Entire Agreement. This Agreement sets forth the entire
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understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between them as to such
subject matter.
17. Headings. The headings contained herein are solely for the
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purposes of reference, are not part of this Agreement and shall not in any way
affect the meaning or interpretation of this Agreement.
18. Assignment. Xxxxxxxx shall not assign his rights and obligations
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under this Agreement. P&G may assign its rights and obligations under this
Agreement to an affiliate.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written.
The Procter & Xxxxxx Company
By: /s/ Xxxxxxxx X. Xxxxx
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Name: Xxxxxxxx X. Xxxxx
Title: Treasurer
Xxxxx Xxxxxxxx
/s/ Xxxxx X. Xxxxxxxx
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NON-COMPETITION AGREEMENT
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THIS NON-COMPETITION AGREEMENT (this "Agreement") is made and entered
effective as of the 26th day of August, 1999, by and between The Procter &
Xxxxxx Company and its affiliates ("P&G"), and Xxxxx Xxxxxxxx ("Xxxxxxxx").
Purpose:
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Recovery Engineering, Inc. ("REI") has entered into an Agreement and
Plan of Merger (the "Merger Agreement") with The Procter & Xxxxxx Company and
Xxxxxxx, Inc. ("Xxxxxxx") , dated as of August 26, 1999, pursuant to which, at
the Effective Time (as defined in the Merger Agreement), REI shall merge with
Xxxxxxx (the "Merger"); and
Xxxxxxxx is the Chairman and Chief Executive Officer of REI and shall
resign his position at REI on the Effective Date; and
Xxxxxxxx, in his employment with REI, learned confidential information and
trade secrets of REI, and established personal and business relationships with
the REI's customers, suppliers and other business associates, and the use by
Xxxxxxxx of such relationships or information to compete with P&G or to aid
others to compete with P&G would have a detrimental effect on the future
profitable operation of P&G; and
Xxxxxxxx has had an opportunity to, and has, reviewed this Agreement and
consulted with counsel regarding same;
NOW, THEREFORE, in consideration of (i) the above premises and (ii) other
good and valuable consideration, the receipt and sufficiency of which hereby are
acknowledged by Xxxxxxxx, Xxxxxxxx and P&G hereby covenant and agree as follows:
1. Term and Compensation. The term of this Agreement shall be for a
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period commencing upon the Effective Date and ending three years thereafter (the
"Non-Compete Term"). In consideration for Xxxxxxxx'x obligations under this
Agreement, P&G shall pay Xxxxxxxx $647,500 on the Effective Date, $647,500 one
(1) year after the Effective Date, and $647,500 two (2) years after the
Effective Date.
2. Non-Competition and Non-Solicitation Covenants. During the Non-Compete
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Term, Xxxxxxxx shall not, as an employee (other than as a consultant of P&G),
employer, stockholder, officer, director, partner, associate, consultant,
advisor, proprietor, lender, or in any other manner or capacity, directly or
indirectly, (i) solicit or hire any employee of P&G or otherwise interfere with
or disrupt the employment relationship between P&G and any employee, (ii) engage
in any business that is competitive with any business or line of business of
REI, as it existed prior to the Effective Date (the "Business"), in any country
in the world and/or (iii) interfere with or otherwise disrupt the relationship
between P&G and any vendor, supplier or
client. Notwithstanding (ii) above, nothing herein shall prohibit Xxxxxxxx from
owning publicly-traded securities of any company that competes with the
Business, so long as Xxxxxxxx does not indirectly or directly control such
company, or is otherwise deemed an affiliate of such company as defined in Rule
144(a)(1) under the Securities Act of 1933, as amended.
Xxxxxxxx expressly recognizes and agrees that the restraints imposed by
this Section 2 are reasonable as to time and geographic scope and not
oppressive. Xxxxxxxx further expressly recognizes and agrees that the
restraints imposed by this Section 2 represent a reasonable and necessary
restriction for the protection of the legitimate interests of the P&G, that the
failure by Xxxxxxxx to observe and comply with the covenants and agreements in
this Section will cause irreparable harm to P&G, that it is and will continue to
be difficult to ascertain the harm and damages to P&G that such a failure by
Xxxxxxxx would cause, that the consideration received by Xxxxxxxx for entering
into these covenants and agreements is fair, that the covenants and agreements
and their enforcement will not deprive Xxxxxxxx of his ability to earn a
reasonable living, and that Xxxxxxxx has acquired knowledge and skills in this
field that will allow him to obtain employment without violating these covenants
and agreements. Xxxxxxxx further expressly acknowledges that he has consulted
independent counsel, and has reviewed and considered this Agreement with that
counsel before executing this Agreement.
3. Memoranda, Notes, Records, Etc. All memoranda, notes, records,
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customer lists or other documents made or compiled by Xxxxxxxx or otherwise made
available to him concerning the business of REI or P&G or its subsidiaries or
affiliates shall become P&G's property and shall be delivered to P&G at the
Effective Date, except to the extent such documents are necessary for Xxxxxxxx
to perform his duties under the Consulting Agreement between Xxxxxxxx and P&G
dated as of an even date herewith, and Xxxxxxxx shall retain no copies of those
documents.
4. Nondisclosure.
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(a) Xxxxxxxx hereby acknowledges that in connection with his
employment by REI he was exposed to and obtained certain information (including
without limitation, procedures, memoranda, notes, records and customer lists
whether such information has been or is made, developed or compiled by Xxxxxxxx
or otherwise has been or is made available to him) regarding the business and
operations of REI; Xxxxxxxx further acknowledges that such information is
unique, valuable, considered trade secrets and deemed proprietary by P&G. For
purposes of this Agreement, such information shall be referred to as
"Confidential Information", except that the following shall not be considered
Confidential Information; (a) information disclosed on a non-confidential basis
to third parties by REI and (b) information disclosed and made available to the
general public under operation of law.
(b) Xxxxxxxx agrees that all Confidential Information is and will
remain the property of the P&G. Xxxxxxxx further agrees, for the duration of
the Non-Compete Term and thereafter, to hold in the strictest confidence all
Confidential Information, and to not, directly or indirectly, duplicate, sell,
use, lease, commercialize, disclose or otherwise divulge to any person or entity
any portion of the Confidential Information or use any Confidential Information
for his
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own benefit or profit or allow any person or entity, other than P&G and its
authorized employees, to use or otherwise gain access to any Confidential
Information.
5. Enforcement. The parties hereto recognize that the covenants of
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Xxxxxxxx hereunder are special, unique and of extraordinary character. If
Xxxxxxxx shall breach or fail to perform any term, condition or duty in this
Agreement required to be observed or performed by Xxxxxxxx, P&G shall be
entitled, inter alia, to institute and prosecute proceedings in any court of
competent jurisdiction, to enforce the specific performance thereof by Xxxxxxxx
and to enjoin Xxxxxxxx from performing services for any person or entity or
otherwise acting in violation of Sections 2, 3 and 4 hereof. In the event of a
breach of the provisions of this Agreement, Xxxxxxxx agrees that the remedies at
law available to P&G would be inadequate to protect P&G's interests;
accordingly, Xxxxxxxx agrees not to challenge the claim by P&G for any equitable
remedy including specific performance on the basis that there are adequate
remedies at law. In case of any breach of this Agreement, nothing herein
contained shall be construed to prevent P&G from seeking such other remedy in
the courts as P&G may elect or invoke.
6. Severability/Modification. If any term or provision of this Agreement
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is held or deemed to be invalid or unenforceable, in whole or in part, by a
court of competent jurisdiction, such term or provision shall be ineffective to
the extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement.
7. Entire Agreement/Amendment. This instrument contains the entire
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agreement between the parties hereto with respect to the subject matter hereof,
and may be amended only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.
8. Assignment.
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(a) Xxxxxxxx may not delegate the performance of any of his
obligations or duties hereunder, or assign any rights hereunder, without the
prior written consent of P&G. Any such purported delegation or assignment in
the absence of such written consent shall be null and void with not force or
effect.
(b) The P&G may not assign this Agreement except to any P&G affiliate.
(c) Subject to the limitations imposed by this Section 10, this
Agreement shall be binding on and inure to the benefit of the parties hereto and
their respective successors, permitted assigns, heirs and legal representatives.
9. Governing Law. THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
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AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA WITHOUT REGARD
TO THE LAWS OF CONFLICT OF LAWS.
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10. Headings. The section headings herein are for convenience only and
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shall not be used in interpreting or construing this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
Xxxxx Xxxxxxxx:
/s/ Xxxxx X. Xxxxxxxx
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The Procter & Xxxxxx Company:
/s/ Xxxxxxxx X. Xxxxx
---------------------------------
By: Xxxxxxxx X. Xxxxx
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Its: Treasurer
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Letter of Understanding
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This Letter of Understanding (the "Agreement") is made and entered
effective as of the 26th day of August, 1999, by and between Recovery
Engineering, Inc. ("REI") The Procter & Xxxxxx Company and its affiliates
("P&G"), and Xxxxx Xxxxxxxx ("Xxxxxxxx").
Purpose
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Recovery Engineering, Inc. ("REI") has entered into an Agreement and Plan
of Merger (the "Merger Agreement") with P&G, dated as of August 26, 1999,
pursuant to which, at the Effective Time (as defined in the Merger Agreement),
REI shall merge with a subsidiary of P&G (the "Merger"); and
Xxxxx Xxxxxxxx ("Xxxxxxxx") is the Chairman and Chief Executive Officer of
REI. Xxxxxxxx is also a significant shareholder of REI.
As mutual inducements for the parties to enter into the Merger Agreement,
the parties agree to the following:
1. Options. Xxxxxxxx owns 250,000 outstanding stock options which were
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granted under various REI stock option plans. Pursuant to such plans
(including, without limitation, change of control provisions in such plans),
Xxxxxxxx has the right to exercise such options on or about the Effective
Time. Notwithstanding the foregoing, Xxxxxxxx agrees that pursuant to the
Merger Agreement, at the Effective Time, all of his 250,000 stock options
will be canceled. With respect to 215,000 of such 250,000 stock options,
Xxxxxxxx will have the right to receive the difference between the strike
price and the Offer Price ($4,568,750) minus the full amount of the
principal and accrued interest (accrued to the Effective Date) under the
Note (as defined below). Xxxxxxxx will have no rights with respect to the
35,000 stock options.
2. Note. Xxxxxxxx has a $497,500 Promissory Note dated April 18, 1997, payable
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to REI, that bears an interest rate of 9.25% per annum ("Note"). Xxxxxxxx'x
obligations under the Note shall be discharged as a result of the amount due
under the Note being deducted from the amount paid to Xxxxxxxx pursuant to
paragraph 1.
3. Other Agreements. Xxxxxxxx has executed a Non-Competition Agreement and a
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Consulting Agreement at an even date herewith.
4. Severance Agreement. Xxxxxxxx agrees that REI shall terminate or cause to
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be terminated the Change-in-Control Severance Pay Agreement between REI and
Xxxxxxxx immediately prior to the Effective Date, such that Xxxxxxxx shall
have no rights thereunder.
Agreed and accepted:
Xxxxx Xxxxxxxx
/s/ Xxxxx X. Xxxxxxxx
___________________
Recovery Engineering, Inc.
/s/ Xxxxx X. Xxxxxxxx
___________________
By: Xxxxx X. Xxxxxxxx
Chief Executive Officer
The Procter & Xxxxxx Company
/s/ Xxxxxxxx X. Xxxxx
________________________
By: Treasurer
