Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 7, 1997, between and among XXXXXXX
INVESTMENTS, INC., a Minnesota corporation (hereinafter called "KII"), XXXX X.
XXXXXXX AND COMPANY, INCORPORATED, a Minnesota corporation (hereinafter called
"JGK"), and XXXXXXX X. XXXXXX (hereinafter called "EXECUTIVE"):
RECITALS
l. The following recitals shall be considered a part of this Agreement and
explain the general nature and purposes of KII's and JGK's businesses and the
PARTIES' rights and obligations under this Agreement. Any interpretation or
construction of this Agreement shall be considered in light of these recitals.
2. KII is a holding company, which owns JGK. JGK is engaged in the highly
competitive business of a securities brokerage firm.
3. EXECUTIVE desires to be employed by KII and its wholly-owned subsidiary,
JGK, and KII and JGK desire to employ EXECUTIVE on the terms stated in this
Agreement.
4. EXECUTIVE recognizes, agrees and understands that execution of this
Agreement is an express condition of becoming and remaining employed by KII and
JGK.
NOW, THEREFORE, in consideration of KII and JGK hiring EXECUTIVE and the
continuation of his employment, any promotions, increases in compensation,
and/or other benefits now or hereafter paid or made available to EXECUTIVE by
KII or JGK, EXECUTIVE and KII agree as follows:
ARTICLE I
DEFINITIONS
1.01 Confidential Information. For the purposes of this Agreement,
"Confidential Information" means any information not generally known to the
public and proprietary to KII or JGK and includes, without limitation, trade
secrets, inventions, and information pertaining to research, development,
purchasing, marketing, selling, accounting, licensing, business systems,
business techniques, customer lists, prospective customer lists, price lists,
business strategies and plans, pending patentable materials and/or designs,
design documentation, documentation of meetings, tests and/or test standards, or
manuals whether in document, electronic, computer or other form. For example,
Confidential Information may be contained in KII's or JGK's customer lists,
prospective customer lists, the particular needs and requirements of customers,
the particular needs and requirements of prospective customers, and the identity
of customers or prospective customers. Information shall be treated as
Confidential Information irrespective of its source and any information which is
labelled or marked as being "confidential" or "trade secret" shall be presumed
to be Confidential Information.
1.02 Invention. For purposes of this Agreement, the term "Invention" means
ideas, discoveries, and improvements whether or not shown or described in
writing or reduced to practice and whether patentable or not, relating to any of
KII's or JGK's present or future sales, research, or other business activities,
or reasonably foreseeable business interests of KII or JGK.
ARTICLE II
EMPLOYMENT, COMPENSATION AND BENEFITS
2.01 Employment With KII. KII hereby initially hires EXECUTIVE in the
position of Chief Operating Officer and EXECUTIVE hereby accepts such employment
with KII. EXECUTIVE shall also serve, subject to employment with KII and annual
election of the shareholders of KII, as a Director on KII's Board of Directors.
The KII Board of Directors will entertain recommendations made by EXECUTIVE as
to any other KII Board members prior to their election to the KII Board of
Directors, including one nominee already recommended by EXECUTIVE to KII's
Chairman of the Board.
2.02 Employment With JGK. KII hereby initially hires EXECUTIVE in the
positions of Chief Executive Officer and President of JGK, and EXECUTIVE hereby
accepts such employment with JGK. EXECUTIVE shall also serve as Chairman of
JGK's Board of Directors so long as he remains employed by JGK. EXECUTIVE,
during his term as Chairman of JGK's Board, will have the authority to name the
members of the JGK Board of Directors, whether from inside or outside the
Company. During his employment with JGK, EXECUTIVE will be responsible for
naming the management of JGK and determining the terms and conditions of their
employment.
2.03 Duties.
(a) EXECUTIVE agrees, during his employment, to devote his full time
and best efforts to the businesses of KII and JGK, including,
without limitation, the performance of those duties and
responsibilities reasonably and customarily associated with his
positions; provided, however, that EXECUTIVE's duties and
responsibilities shall be subject to determination by KII's Board
of Directors. EXECUTIVE shall be granted such powers and
authority as are reasonably and customarily associated with his
positions.
(b) EXECUTIVE shall report to, and at all times shall be subject to
the direction of, the Chairman of KII's Board of Directors.
(c) EXECUTIVE, at all times during his employment with KII and JGK,
shall comply with KII's and JGK's reasonable standards,
regulations and policies as determined or set forth by the KII
Board of Directors from time to time and as applicable to senior
executive employees of KII and JGK.
(d) EXECUTIVE shall maintain and improve his managerial skills and
knowledge of KII's and JGK's businesses by attending appropriate
conventions and seminars, and participating in other activities
reasonably related thereto. JGK shall pay and/or reimburse those
expenses of EXECUTIVE, approved by KII, which are reasonably
related to this subparagraph 2.03(d).
(e) Subject to the provisions set forth in Article III and Paragraph
10.05, and if still then employed by KII, EXECUTIVE shall be
offered the position of Chief Executive Officer of KII on or
before December 31, 1999, and once EXECUTIVE accepts such
position he shall retain such position during EXECUTIVE's
employment with KII.
2.04 Outside Activities. KII and JGK acknowledge and agree that from time
to time EXECUTIVE may serve as a member of the Board of Directors of one or more
nonprofit entities or businesses other than KII or JGK; provided, however, that
EXECUTIVE provides KII's Board of
Directors with information about each proposed directorship, including time
required by such directorship, whether such directorship may involve conflicts
of interest with KII or JGK or their businesses, the types of risks which such
directorship may involve, and any other factors EXECUTIVE or the KII Board of
Directors considers material respecting such directorship. KII's Board of
Directors shall promptly consider all submissions by EXECUTIVE pursuant to this
Paragraph 2.04. KII's Board of Directors may request in good faith that
EXECUTIVE not accept a particular directorship, or more than a specific number
of directorships, or that EXECUTIVE resign from a particular directorship, and
EXECUTIVE agrees to honor such requests.
2.05 Base Salary By JGK. EXECUTIVE's initial base salary shall be
calculated on the gross amount of $250,000 per year, less withholding for income
and FICA taxes and any other proper deductions. EXECUTIVE'S base salary will be
paid to him in accordance with JGK's normal payroll practices. Future increases,
beginning in 1999, in annual base salary may be negotiated between the EXECUTIVE
and KII's Board of Directors.
2.06 Incentive Compensation By JGK. EXECUTIVE shall participate in the JGK
Management Bonus Pool plan or other incentive plans or programs adopted by KII's
Board of Directors. The Compensation Committee of the KII Board of Directors
(the "Compensation Committee") will decide upon the amount of EXECUTIVE's
incentive compensation, subject to the following minimum amounts. EXECUTIVE and
KII will devise a new or revised incentive compensation plan or program that
will take into account financial and non-financial objectives. The financial
objectives will be as stated in the existing JGK plan, plus some additional
targets to be defined for KII, which may include such measurements as per share
earnings growth, return on equity and other objectives. The non-financial
objectives will be based on the business development plans of KII and JGK from
time to time.
(a) For 1997, EXECUTIVE shall receive a minimum incentive
compensation of $280,000.
(b) For 1998, EXECUTIVE shall receive a minimum incentive
compensation of $250,000.
(c) For 1999 and years thereafter, EXECUTIVE's incentive compensation
shall be an amount to be approved by the KII Board of Directors.
EXECUTIVE'S incentive compensation will be paid to him in a lump sum within 60
days after the close of each fiscal year.
2.07 Stock Options. EXECUTIVE shall be granted options to purchase 165,000
shares of common stock of KII pursuant to the KII 1997 Stock Option Plan. Such
options shall have an exercise price of $6.00 per share, shall vest in equal
annual increments on December 31 in each of the years 1997 through 2001, and
shall have a ten-year term. Of such options, 82,500 shall be incentive stock
options and 82,500 shall be non-statutory stock options.
2.08 Fringe Benefits From JGK.
(a) In addition to cash compensation, EXECUTIVE shall be eligible to
receive fringe benefits as they may be made available to senior
executive employees of KII or JGK and offered to EXECUTIVE from
time to time in the exclusive discretion of KII's Board of
Directors or authorized delegate(s) of the KII Board of
Directors. Such benefits may include, but are not limited to,
bonuses, qualified pension or retirement plans, health insurance
and disability plans and deferred compensation agreements.
(b) EXECUTIVE shall be eligible to participate in any and all other
employee benefit plans and programs offered by JGK from time to
time, including, but not limited to, any medical, dental,
short-term disability and life insurance coverage, stock option,
or retirement plans, in accordance with the terms and conditions
of those benefit plans and programs and on a basis consistent
with that customarily provided to JGK's senior executive
employees.
(c) The PARTIES shall enter into a separate agreement under which JGK
shall provide EXECUTIVE with a supplemental retirement benefit
("SRB") so that in the event EXECUTIVE's employment terminates
before he is fully vested under the Xxxx X. Xxxxxxx and Company,
Incorporated Pension Plan ("Plan"), the total benefit paid under
the Plan and the SRB will provide EXECUTIVE with the same total
retirement benefit as if he was fully vested under the Plan.
(d) JGK shall pay all of EXECUTIVE'S expenses for trade association
memberships and fees to obtain the necessary securities licenses.
2.09 Non-Reimbursed Additional Expenses. JGK shall pay EXECUTIVE $25,000
per annum for other non-reimbursed additional expenses, which payments shall be
made in quarterly installments on the last business day of each quarter
beginning on June 30, 1997. In addition, JGK shall match charitable
contributions made by EXECUTIVE, up to an aggregate annual limit of $10,000
beginning in 1998 and $7,500 for 1997.
2.10 Vacation. In addition to the foregoing cash and fringe benefit
compensation, EXECUTIVE may be entitled to a paid vacation of a duration
determined by KII's Board of Directors.
2.11 Compensation During Sickness or Disability.
(a) Subject to the remaining provisions of this Paragraph 2.11,
EXECUTIVE shall be entitled to full compensation, calculated in
accordance with Article II hereof, for absences for physical or
mental illness or injury.
(b) If EXECUTIVE is absent from his employment for more than four
consecutive weeks at any one time or more than eight weeks in
total in any 12-month period, by reason of physical or mental
illness or injury which prevents him from performing the
essential functions of his position, with or without reasonable
accommodation, EXECUTIVE shall be deemed disabled for the
purposes hereof. In such event, EXECUTIVE shall be entitled to
receive (1) his base salary and incentive and bonus compensation
under Article II hereof, including payments under Paragraphs
2.05, 2.06, and 2.09, (2) continued payment on behalf of
EXECUTIVE of JGK's share of health, life, and disability
insurance premiums to the extent such benefits are offered by JGK
to its senior executive employees and subject to the conditions
or limitations of such insurance plans, (3) continued entitlement
of EXECUTIVE to other fringe benefits under Paragraphs 2.08 and
2.13(a) and (c), and (4) EXECUTIVE's continued accrual of
vacation time, all for a period of 90 days from the date such
disability is determined to have occurred.
JGK may, in its discretion, provide the health, life and
disability benefits described herein under JGK's group plans or
under no less favorable insurance contracts or arrangements
secured by JGK. For purposes of Title X of the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA"), the date of
the "qualifying event" for
EXECUTIVE and his dependents shall be the date such disability is
determined to have occurred.
Immediately upon completion of such 90-day period:
(i) EXECUTIVE's employment as an officer and employee under
this Agreement shall terminate effective at 12:00
midnight on such 90th day; and
(ii) All payments to EXECUTIVE of base salary under
Paragraph 2.05 shall terminate; and
(iii)EXECUTIVE shall receive all incentive compensation or
bonus amounts earned by EXECUTIVE pro rated to the date
of termination, except that (1) incentive compensation
or bonus amounts payable upon the completion of
specified tasks or objectives shall be paid in full if
such tasks or objectives have been completed by
EXECUTIVE prior to the date of termination, and (2)
EXECUTIVE shall receive the full amount of all
incentive compensation or bonus amounts earned for any
year ending during or prior to such 90-day period; and
(iv) EXECUTIVE shall receive or not receive payment for
unused vacation to the date of termination in
accordance with JGK's policy as to payment for unused
vacation in effect on the date of termination; and
(v) JGK's obligation to provide, subject to limitations of
law, and pay for benefits provided by JGK to EXECUTIVE
shall terminate; and
(vi) EXECUTIVE shall not be entitled to use unused vacation
to defer the commencement of, or extend, the 90-day
disability period established in this Paragraph 2.11.
(c) If prior to the termination of EXECUTIVE's employment pursuant to
the provisions of this Paragraph 2.11, EXECUTIVE is able to
resume performance of his duties under this Agreement, and if
within six months of the resumption of such duties EXECUTIVE is
again absent from his employment by reason of the same physical
or mental illness or injury as defined in subparagraph 2.11(b)
for a period of more than two consecutive weeks, such subsequent
disability period, including such two-week period, shall be
deemed to be a continuation of the immediately preceding
disability period, and the disability payments made by JGK to
EXECUTIVE shall be made only for the remainder, if any, of the
90-day income continuation period provided for above, and in no
event shall disability payments hereunder be made for a period or
periods aggregated in accordance with this subparagraph 2.11(c)
of more than 90 days.
(d) Any disability period commencing after EXECUTIVE has returned to
his employment hereunder and has given reasonable and proper
attention to his duties for a continuous period of six months
shall be deemed a new period of disability for purposes of this
Paragraph 2.11.
(e) Any disability compensation payable under this Article II shall
be reduced by:
(i) Any amount which is paid to EXECUTIVE with respect to
the 90-day disability period established in Paragraph
2.11 under any private disability benefit plan or
arrangement to which JGK directly contributes or has
directly contributed, but only to the extent that such
amount is attributable to such direct contributions by
JGK.
(ii) Any benefits paid to EXECUTIVE with respect to the
90-day disability period established in Paragraph 2.11
on account of the disability of EXECUTIVE under any
worker's compensation law, occupational disease law, or
similar legislation of any state or the federal
government.
(iii)50% of the amount of any related benefit paid to
EXECUTIVE with respect to the 90-day disability period
established in Paragraph 2.11 under the Federal Social
Security Act as in effect at the time the payment
hereunder is made.
However, in order to maintain EXECUTIVE's cash flow during the
90-day disability period, JGK agrees to make full compensation
payments to EXECUTIVE as previously provided and EXECUTIVE
agrees promptly upon receipt of payments within the provisions
of this subparagraph 2.11(e), if any, to remit such payments
to JGK, properly endorsed, or repay to JGK the full amount of
such received payments.
(f) In the event of partial physical or mental disability, if
EXECUTIVE is able to perform a substantial portion of the
essential functions of his position, with or without reasonable
accommodation, he may, if he so desires, with the consent of JGK,
which consent shall be by action of JGK's Board of Directors,
work part-time on a basis of compensation and other terms
determined by JGK.
(g) If EXECUTIVE's employment is terminated for the reasons stated in
subparagraphs 3.01(a), (b), (c)(v), or (c)(vi) while JGK is
making disability payments to EXECUTIVE, EXECUTIVE shall not be
entitled to receive the disability payments for the remainder, if
any, of the 90-day compensation continuation period provided for
above, EXECUTIVE 's repayment obligations under subparagraph
2.11(e) above shall cease, and EXECUTIVE shall have no further
employment obligation to JGK and KII. In all other instances of
termination pursuant to Paragraph 3.01, EXECUTIVE shall be
entitled to continue to receive disability payments for the
remainder of the 90-day compensation continuation period.
2.12 Expenses. During the term of this Agreement, EXECUTIVE shall be
entitled to prompt reimbursement by JGK for all reasonable, ordinary and
necessary travel, entertainment and other business related expenses incurred by
EXECUTIVE (in accordance with the policies and procedures established by JGK for
senior executive employees from time to time) in the performance of his duties
and responsibilities under this Agreement; provided, however, that EXECUTIVE
shall properly account for such expenses in accordance with federal, state and
local tax requirements and JGK's policies and procedures.
2.13 Additional Perquisites.
(a) JGK shall reimburse EXECUTIVE for annual dues at the Minneapolis
Club and for annual dues at a country club, which country club
dues shall be prorated between business purposes and personal
use.
(b) KII shall lend EXECUTIVE an amount not to exceed $125,000 for his
purchase of an equity interest in the Spring Hill Country Club
(or any successor thereto); such loan shall be interest free and
shall be repaid upon EXECUTIVE's termination of employment with
KII and shall be evidenced by a promissory note signed by
EXECUTIVE in exchange for the loan.
(c) JGK shall provide EXECUTIVE at its expense with indoor parking, a
cellular phone and a computer and a fax machine for business
purposes.
ARTICLE III
TERMINATION
3.01 Events of Termination. EXECUTIVE's employment with KII and JGK:
(a) May be terminated by mutual written agreement of KII and
EXECUTIVE.
(b) Shall terminate immediately upon the death of EXECUTIVE.
(c) May be terminated upon written notice from KII to EXECUTIVE for
cause, which shall mean the following:
(i) Material failure of EXECUTIVE to (a) faithfully,
diligently or competently perform the material duties,
requirements and responsibilities of his employment as
contemplated by this Agreement or as assigned by KII's
Board of Directors, or (b) take reasonable direction
consistent with his position from the KII's Board of
Directors; or
(ii) Failure of EXECUTIVE to materially comply with the
material, reasonable policies, regulations and
directives of KII as in effect from time to time; or
(iii)Any act or omission on the part of EXECUTIVE which
constitutes a material failure to comply with material
provisions of this Agreement; or
(iv) Any act or omission on the part of EXECUTIVE which is
clearly and materially harmful to the reputations or
businesses of KII and JGK, including, but not limited
to, personal conduct of EXECUTIVE which is inconsistent
with federal and state laws respecting harassment of,
or discrimination against, one or more of KII's or
JGK's employees; or
(v) Failure to maintain licenses as required by applicable
regulatory agencies; or
(vi) Conviction of EXECUTIVE of, or a guilty or nolo
contendere plea by EXECUTIVE with respect to, any crime
punishable as a felony; or any bar against EXECUTIVE
from serving as a director, officer or executive of any
firm the securities of which trade publicly.
In the event of termination pursuant to subparagraphs
3.01(c)(i) through (iv) above, KII shall give EXECUTIVE
written notice (the "Cause Notice") of proposed termination
which provides reasonable detail as to the cause or causes
asserted by KII. EXECUTIVE shall have 60 days within which he
shall have the opportunity to cure the performance or conduct
upon which the Cause Notice is based, to the satisfaction of
KII's Board of Directors. If EXECUTIVE asserts that there is
no performance or conduct to cure, or after 60 days the KII
Board of Directors believes that EXECUTIVE has failed to
adequately cure the performance or conduct, the KII Board of
Directors shall set forth a date of a meeting of KII's Board
of Directors, which date shall be no sooner than five business
days after the date on which the 60-day cure period expires or
upon receipt of notice by EXECUTIVE that he believes there is
no performance or conduct which requires a cure, at which KII
Board of Directors meeting EXECUTIVE may appear, with an
advisor of his choice if EXECUTIVE so desires, to discuss
EXECUTIVE's proposed termination. At such meeting EXECUTIVE
and EXECUTIVE's advisor will honor requests by the director
presiding at the meeting to leave the meeting to allow for
discussion by the directors in EXECUTIVE's absence. At such
time as the KII Board of Directors reaches a decision with
respect to EXECUTIVE's termination, whether at the meeting set
forth in the notice to EXECUTIVE, or at a subsequent meeting,
if the decision to terminate EXECUTIVE is affirmed by KII's
Board of Directors, EXECUTIVE will be given written notice of
such affirmation and EXECUTIVE's employment will terminate
immediately upon the giving of such notice to EXECUTIVE. In
the event of termination pursuant to subparagraphs 3.01(c)(v)
and (vi) above, EXECUTIVE's termination shall be immediate
upon the giving of written notice to EXECUTIVE.
(d) Shall terminate in accordance with the provisions of Paragraph
2.11(b) hereof. Nothing in Paragraph 2.11(b) hereof or in this
Paragraph 3.01(d) shall limit the right of either party to
terminate EXECUTIVE's employment under any other subparagraph of
Paragraph 3.01; provided, however, that if EXECUTIVE is receiving
disability payments under subparagraph 2.11(b), KII may not
terminate this Agreement under subparagraphs 3.01(c)(i),(ii), or
(iii), (e), or (i).
(e) May be terminated by KII or EXECUTIVE upon 60 days' written
notice to the other upon the commencement of a bankruptcy case
filed by or against KII or JGK under the United States Code or
other similar law.
(f) Shall terminate at the end of the month during which EXECUTIVE
reaches the normal retirement date established by JGK for senior
management employees of JGK, but in no event earlier than the
compulsory retirement age permitted under federal or similar law
for senior management employees.
(g) May be terminated by EXECUTIVE for "Good Reason" upon 60 days'
written notice to KII's Board of Directors setting forth in
reasonable detail such Good Reason, unless during such 60-day
period KII's Board of Directors materially cures all material
items set forth in EXECUTIVE's notice. Good Reason shall only
exist in the event that KII:
(i) Reduces EXECUTIVE's base salary below the level set in
Paragraph 2.05, fails to provide EXECUTIVE with
incentive compensation as contemplated in Paragraph
2.06, or reduces any KII-provided benefit to EXECUTIVE
as then paid or provided to EXECUTIVE; provided,
however, that KII may reduce benefits provided to
EXECUTIVE if such reduction is part of a broad-based
management initiative which applies to all senior
executive employees and substantially all other
employees of KII or JGK; or
(ii) Takes any action to reduce EXECUTIVE's titles,
positions or duties, or any action directed only at
EXECUTIVE which materially and adversely affects the
overall physical conditions of EXECUTIVE's immediate
working environment and places EXECUTIVE in a
substandard working environment relative to KII's other
senior executive employees; or
(iii)Requires EXECUTIVE to relocate his principal office to
a location more than 50 miles from the location of
KII's principal place of business at the time this
Agreement was executed.
(iv) Fails to offer the EXECUTIVE the position of Chief
Executive Officer of KII no later than December 31,
1999.
(h) May be terminated by EXECUTIVE for any reason other than those
set forth in subparagraph 3.10(g) on 60 days' written notice to
KII.
(i) May be terminated by KII for any reason on 60 days' written
notice to EXECUTIVE by payment of severance equal to EXECUTIVE's
base salary in lieu of such notice.
(j) May be terminated by KII no earlier than June 30, 1999, on six
months' written notice to EXECUTIVE of KII's intent not to renew
this Agreement under Paragraph 10.05.
(k) Change of Control. If there is a Change-of-Control (defined as
some individual, group, or institution other than existing KII or
future employee-related programs of KII or its subsidiaries
acquiring over 20% of the voting equity of KII, but not including
(a) a transaction initiated by KII to obtain participation funds;
(b) a transaction initiated by KII where KII is the surviving
entity and EXECUTIVE is the Chief Executive Officer of KII after
the transaction; or (c) a transaction initiated by an individual,
group, or institution acting at the instigation of or in concert
with EXECUTIVE), whether or not EXECUTIVE's employment
terminates, EXECUTIVE will immediately become vested in all stock
options granted simultaneously with the execution of this
Agreement. EXECUTIVE will be entitled to payments to cover all
the base salary, incentive compensation, bonuses, benefits, and
perquisites that he would receive if he were to remain employed
by KII for an additional 36 months at his then current base
salary, with his annual incentive payments calculated at two
times his then current base salary. Payments will be made on a
periodic basis. EXECUTIVE will be entitled to receive these
payments even if the 20% owner wants EXECUTIVE to remain in
employment and even if EXECUTIVE elects to remain in employment.
If EXECUTIVE remains in employment, however, the 36-month payout
period for base salary, incentive compensation, bonuses,
benefits, and perquisites will be reduced by one month for each
full month of his continued employment. If the vesting of any
stock options and other amounts payable to EXECUTIVE upon a
Change-of-Control not initiated by KII constitute an "excess
parachute payment" within the meaning of Internal Revenue Code
Section 280G, then EXECUTIVE shall entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that
after payment by EXECUTIVE of all taxes (including any interest
or penalties imposed with respect to such taxes other than
interest and penalties imposed on EXECUTIVE as a result of his
failure to file timely income tax
returns or to disclose required information respecting such
excise tax), including, without limitation, any income taxes and
excise tax imposed upon the Gross-Up Payment, EXECUTIVE retains
an amount of the Gross-Up Payment sufficient to pay the excise
tax imposed upon the excess parachute payment. If any other
agreement between EXECUTIVE and KII provides for payments by KII
similar in nature to the Gross-Up Payment provided for in this
Paragraph 3.01(k), and EXECUTIVE receives such similar payments
under such other agreement, then the Gross-Up Payment otherwise
required hereunder shall be reduced to the extent necessary to
avoid duplication of the benefit intended to be conferred upon
EXECUTIVE by the making of a Gross-Up Payment pursuant to this
Agreement. If there is a Change-of-Control and if the acquiring
party seeks to have the transaction accounted for on a "pooling
of interests" basis and, in the opinion of KII's independent
certified public accountants, accelerating the exercisability of
EXECUTIVE's options as a result of the transaction would preclude
a pooling of interests under generally accepted accounting
principles, then the exercisability of such options will not
accelerate.
3.02 Compensation Upon Termination of EXECUTIVE's Employment. In the event
that EXECUTIVE's employment with KII and JGK terminates the following provisions
shall govern as applicable:
(a) If termination occurs pursuant to subparagraph 3.01(a) the
agreement of the parties shall control.
(b) If termination occurs pursuant to subparagraphs 3.01(b), (c), (f)
or (h), all benefits and compensation shall terminate as of the
end of the month in which the termination occurs and a prorated
incentive compensation amount shall be paid based upon the number
of months EXECUTIVE worked during that calendar year.
(c) If the termination occurs pursuant to subparagraph 3.01(e), all
benefits and compensation shall terminate as of the termination
date.
(d) If termination occurs pursuant to subparagraph 3.01(d), the
provisions of Paragraph 2.11 shall govern the termination of
benefits, base salary, bonus, and incentive compensation.
(e) If termination occurs pursuant to subparagraphs 3.01(g), (i), or
(j), EXECUTIVE shall receive cash payments equal to the amounts
EXECUTIVE would have been paid under Paragraph 2.09 if he had
remained employed for the balance of the then current term of the
Agreement and, for the balance of the then current term of the
Agreement plus the 12-month period immediately following the end
of such term (the "Severance Period"), EXECUTIVE (i) shall become
immediately vested in all stock options granted simultaneously
with the execution of this Agreement that would have become
vested if EXECUTIVE had remained employed by KII for the
Severance Period; (ii) shall receive the base salary and
incentive compensation provided for in Paragraphs 2.05 and 2.06
for the Severance Period; provided, however, that the incentive
compensation shall not be prorated and, for purposes of this
provision only, EXECUTIVE's incentive compensation for 1999 will
be deemed to be $500,000 and for subsequent years will be either
an amount determined under the then applicable incentive
compensation plan or program or, in the absence of such plan or
program, two times EXECUTIVE's then current base salary; (iii)
shall continue to participate in the benefit plans and programs
specified in Paragraph 2.08 to the extent permitted by the terms
of such plans and programs or, in
lieu of such continued participation, shall receive cash payments
equal to the value of the benefits EXECUTIVE would have received
under such plans and programs (excluding any long-term disability
insurance) had he remained employed by KII for the Severance
Period; and (iv) shall receive cash payments equal to the amounts
EXECUTIVE would have been paid under subparagraph 2.13(a) had he
remained employed by KII for the Severance Period.
(f) If termination occurs pursuant to subparagraph 3.10(k), the
compensation set forth in that provision shall apply.
(g) All payments made to EXECUTIVE under this Paragraph 3.02 shall be
reduced by amounts (i) required to be withheld in accordance with
federal, state and local laws and regulations in effect at the
time of payment, or (ii) owed to KII and JGK by EXECUTIVE for any
amounts advanced, loaned or misappropriated.
3.03 Return of KII and JGK Property. In the event of termination of
EXECUTIVE's employment all corporate documents, records, files, credit cards,
computer disks and tapes, computer access cards, codes and keys, file access
codes and keys, building and office access cards, codes and keys, materials,
equipment and other property of KII and JGK which is in EXECUTIVE's possession
shall be returned to KII and JGK at their principal business offices on the date
of termination of EXECUTIVE's employment, or within five business days
thereafter if termination occurs without notice. EXECUTIVE may copy, at
EXECUTIVE's expense, documents, records, materials and information of KII and
JGK only with KII's and JGK's express, written permission.
ARTICLE IV
PROTECTION OF TRADE SECRETS AND
CONFIDENTIAL BUSINESS DATA
4.01 Confidential Information. The definition of "Confidential Information"
as set forth in Paragraph 1.01 is not intended to be complete. From time to time
during the term of his employment, EXECUTIVE may gain access to other
information not generally known to the public and proprietary to KII or JGK
concerning KII's and/or JGK's businesses that is of commercial value to KII
and/or JGK, which information shall be included in the definition under
Paragraph 1.01 above, even though not specifically listed in that Paragraph. The
definition of Confidential Information and the provisions of this Article IV
apply to any form in which the subject information, trade secrets, or data may
appear, whether written, oral, or any other form of recording or storage.
4.02 Maintain in Confidence. EXECUTIVE shall hold the Confidential
Information, including trade secrets and/or data, in the strictest confidence
and will never, without prior written consent of KII and JGK, (directly or
indirectly) disclose, assign, transfer, convey, communicate to or use for his
own or another's benefit or (directly or indirectly) disclose, assign, transfer,
convey, communicate to or use by him, a competitor of KII or JGK or any other
person or entity, including, but not limited to, the press, other professionals,
corporations, partnerships or the public, at any time during his employment with
KII or JGK or at any time after his termination of employment with KII or JGK,
regardless of the reason for the EXECUTIVE's termination, whether voluntary or
involuntary; provided however, that the restrictions provided herein in
Paragraph 4.02 as to the identity of customers or prospective customers shall
terminate at the same time as the expiration of the non-compete period as set
forth in Paragraph 5.01. EXECUTIVE further promises and agrees that he will
faithfully abide by any rules, policies, practices
or procedures existing or which may be established by KII and JGK for insuring
the confidentiality of the Confidential Information, including, but not limited
to, rules, policies, practices or procedures:
(a) Limiting access to authorized personnel;
(b) Limiting copying of any writing, data or recording;
(c) Requiring storage of property, documents or data in secure
facilities provided by KII or JGK and limiting safe or vault lock
combinations or keys to authorized personnel; and/or
(d) Checkout and return or other procedures promulgated by KII or JGK
from time to time.
4.03 Return of Information. Upon termination of the employer-employee
relationship, whether voluntary or involuntary, EXECUTIVE will return to KII and
JGK any and all written or otherwise recorded form of all Confidential
Information (and any copies thereof) in his possession, custody or control,
including, but not limited to, notebooks, memoranda, specifications, customer
lists, prospective or potential customer lists, or price lists, and will take
with him, upon leaving KII's and/or JGK's place of business or employment with
KII or JGK, no such documents, data, writings, recordings, or reproduction in
any form which may have been entrusted or obtained by him during the course of
his employment or to which he had access, possession, custody or control, except
with KII's and JGK's express, written permission. Upon termination of
employment, whether voluntary or involuntary, EXECUTIVE will deliver to KII and
JGK all Confidential Information in recorded form in his possession, custody or
control and shall also deliver any and all property, devices, parts, mock-ups,
and finished or unfinished machinery or equipment in his possession, custody or
control which belongs to KII or JGK. EXECUTIVE shall also deliver, upon his
termination, whether voluntary or involuntary, all records, drawings,
blueprints, notes, notebooks, memoranda, specifications and documents or dates,
in any form, which contain Confidential Information.
4.04 Irreparable Harm. The PARTIES acknowledge that KII and JGK will suffer
irreparable harm if the EXECUTIVE breaches Paragraphs 4.02 or 4.03, either
during or after his employment. Accordingly, KII or JGK shall be entitled, in
addition to any other right and remedy they may have, at law or equity, to a
temporary restraining order and/or injunction, without the posting of a bond or
other security, enjoining or restraining the EXECUTIVE from any violation of
Paragraphs 4.02 or 4.03, and the EXECUTIVE hereby consents to KII's or JGK's
right to seek the issuance of such injunction. If KII or JGK institutes any such
action against EXECUTIVE, alone or in conjunction with any third party or
parties to enforce any terms or provisions of Paragraphs 4.02 or 4.03, then the
party that prevails in such action shall be entitled to receive from the
opposing party (or parties) in the action the prevailing party's reasonable
attorneys' fees incurred in such action and all costs and expenses incurred in
connection therewith in accordance with Paragraph 8.02.
ARTICLE V
COVENANT NOT TO COMPETE
5.01 Noncompete. At no time during the term of this Agreement and for a
period of one year immediately following the termination of EXECUTIVE's
employment (whether voluntary or involuntary) or December 31, 1999, whichever
occurs last, will EXECUTIVE:
(a) Acting on behalf of himself, another business or competitor, call
upon or communicate with or attempt to call upon or communicate
with any customer or potential or
prospective customer of KII or JGK with whom EXECUTIVE (or other
employees of KII or JGK under his supervision), during the 12
months prior to his termination, had contact, for the purpose
(either directly or indirectly) of soliciting, selling or buying
any services, merchandise or products similar to or competitive
with the services, merchandise or products sold or purchased by
KII or JGK; and
(b) Without the prior written consent of KII or JGK, directly or
indirectly render any services, advice or counsel as an owner,
employee, representative, agent, independent contractor,
consultant or in any other capacity, for any third party, if the
rendering of such services, advice or counsel involves, may
involve, requires or is likely to result in the use or disclosure
by EXECUTIVE of any Confidential Information.
5.02 Irreparable Harm. The parties acknowledge that KII and JGK will suffer
irreparable harm if EXECUTIVE breaches Paragraph 5.01. Accordingly, KII and JGK
shall be entitled, in addition to any other right and remedy they may have, at
law or equity, to a temporary restraining order and/or injunction, without the
posting of a bond or other security, enjoining or restraining EXECUTIVE from any
violation of Paragraph 5.01, and EXECUTIVE hereby consents to KII's and JGK's
right to seek the issuance of such injunction. If KII or JGK institutes any such
action against EXECUTIVE, alone or in conjunction with any third party or
parties to enforce any terms or provisions of Paragraph 5.01, then the party
that prevails in such action shall be entitled to receive from the opposing
party (or parties) in the action the prevailing party's reasonable attorneys'
fees incurred in such action and all costs and expenses incurred in connection
therewith in accordance with Paragraph 8.02.
5.03 Limit to Extent Enforceable. In the event that a court of competent
jurisdiction determines that any of the provisions of Paragraph 5.01 are
unreasonable, it may limit such provision to the extent it deems reasonable,
without declaring the provision or Paragraph 5.01 invalid in its entirety. This
provision shall not be construed as an admission by KII or JGK, but is only
included to provide KII and JGK with the maximum possible protection for their
businesses, Confidential Information, trade secrets and data, consistent with
the right of EXECUTIVE to earn a livelihood subsequent to the termination of his
employment.
ARTICLE VI
INVENTIONS
6.01 Disclosure. EXECUTIVE shall promptly and fully disclose to KII and JGK
and will hold in trust for KII's and JGK's sole right and benefit any invention
which EXECUTIVE, during the period of his employment, makes, conceives, or
reduces to practice or causes to be made, conceived, or reduced to practice
either alone or in conjunction with others that:
(a) Relates to any subject matter pertaining to EXECUTIVE's
employment;
(b) Relates to or is directly or indirectly connected with the
business, products, projects, or Confidential Information of KII
or JGK; or
(c) Involves the use of any time, material, or facility of KII or
JGK.
6.02 Assignment of Ownership. EXECUTIVE hereby assigns to KII and JGK all
of EXECUTIVE's right, title, and interest in and to all such inventions as
described in Paragraph 6.01 and, upon KII's request, EXECUTIVE shall execute,
verify, and deliver to KII or JGK such documents
including, without limitation, assignments and applications for Letters Patent,
and shall perform such other acts, including, without limitation, appearing as a
witness in any action brought in connection with this Agreement that is
necessary to enable KII or JGK to obtain the sole right, title, and benefit to
all such inventions.
6.03 Excluded Inventions. It is further agreed, and EXECUTIVE is hereby so
notified, that the above agreement to assign inventions to KII or JGK does not
apply to any invention for which no equipment, supplies, facility, or
Confidential Information of KII or JGK was used, which was developed entirely on
EXECUTIVE's own time, and
(a) Which does not relate:
(i) Directly to the businesses of KII or JGK; or
(ii) To KII's or JGK's actual or demonstrably anticipated
research or development; or
(b) Which does not result from any work performed by EXECUTIVE for
KII or JGK.
6.04 Prior Inventions. Attached to this Agreement and initialed by both
PARTIES is a list of all of the inventions, by description, if any, in which
EXECUTIVE possesses any right, title, or interest prior to this employment and
the execution of this Agreement, which are not subject to the terms of this
Agreement.
6.05 Specific Performance; Attorney Fees. EXECUTIVE expressly acknowledges
and agrees that any violation of any terms of Paragraphs 6.01 or 6.02 may result
in the issuance of a temporary restraining order and/or injunction against
EXECUTIVE to effect specific performance of the terms of Paragraphs 6.01 or
6.02. If KII or JGK institutes any action against EXECUTIVE, alone or in
conjunction with any third party or parties, to enforce any term or provision of
Paragraphs 6.01 or 6.02, then the party that prevails in such action shall be
entitled to receive from the opposing party (or parties) in the action the
prevailing party's reasonable attorneys' fees incurred in such action and all
costs and expenses incurred in connection therewith in accordance with Paragraph
8.02.
ARTICLE VII
ARBITRATION
7.01 Agreement to Arbitrate. With the exception of KII's and JGK's rights
to seek injunctive relief in connection with breaches by EXECUTIVE of Paragraphs
4.02, 4.03, 5.01 and/or 6.01 or 6.02 of this Agreement, all disputes or claims
arising out of or in any way relating to this Agreement, including the making of
this Agreement, shall be submitted to and determined by final and binding
arbitration before the National Association of Securities Dealers, Inc. ("NASD")
in accordance with the NASD Code of Arbitration Procedure, or if the NASD
refuses to accept jurisdiction, before the American Arbitration Association
("AAA") under the AAA's National Rules for the Resolution of Employment Disputes
(effective June 1996). The award of the arbitrator(s), or a majority of them,
shall be final and judgment upon such award may be entered in any court of
competent jurisdiction. This arbitration provision shall continue in full force
and effect after EXECUTIVE's termination of employment under this Agreement.
7.02 Discovery. In addition to any other procedures provided for under the
rules of the NASD or the AAA, upon written request, each party shall, at least
14 days prior to the date of any hearing, provide to the opposite party a copy
of all documents relevant to the issues raised by any claim or counterclaim and
a list of all witnesses to be called by that party at the hearing and each party
shall be permitted to take one deposition at least 14 days prior to any hearing.
7.03 Costs. The costs of proceedings under Article VII shall be paid in
accordance with the provisions of Article VIII below.
ARTICLE VIII
CERTAIN KII REMEDIES
8.01 Certain KII Remedies. The PARTIES acknowledge that KII and JGK will
suffer irreparable harm if the EXECUTIVE breaches Paragraphs 4.02, 4.03, 5.01
and/or 6.01 or 6.02 of this Agreement. Accordingly, KII and JGK shall be
entitled to seek any right or remedy they may have, under this Agreement or
otherwise, at law or equity, including but not limited to, an injunction,
enjoining or restraining EXECUTIVE from any violation of Paragraphs 4.02, 4.03,
5.01 and/or 6.01 or 6.02 of this Agreement.
8.02 Payment of Fees and Expenses. If any party initiates or becomes a
party to a formal proceeding in law or equity, or under Article VII, involving
this Agreement, and if either party obtains a substantial portion of the relief
requested by that party (the "prevailing party"), then the non-prevailing party
shall pay all of its and the prevailing party's reasonable costs and expenses,
including reasonable attorneys' fees and expenses, incurred with respect to such
proceeding. If neither party obtains a substantial portion of the relief
requested each shall bear its/his own expenses. In the event (i) EXECUTIVE is
terminated pursuant to Paragraph 3.01 (c) and determines to challenge KII's
determination of cause, or (ii) EXECUTIVE resigns for Good Reason pursuant to
Paragraph 3.01(g) and KII contends that Good Reason does not exist, KII and
EXECUTIVE shall each bear its/his own expenses in connection with any proceeding
initiated by EXECUTIVE with respect to the determination as to "Cause" or by KII
with respect to the determination of "Good Reason", as the case may be.
ARTICLE IX
INDEMNIFICATION
9.01 Indemnification. As to acts or omissions of EXECUTIVE which are within
the scope of EXECUTIVE's authority as an officer, director, or employee of KII
or JGK and/or any affiliate of KII or JGK, KII and JGK shall indemnify
EXECUTIVE, and his legal representatives and heirs, to the maximum extent
permitted by Minnesota law.
ARTICLE X
MISCELLANEOUS
10.01 Governing Law. This Agreement shall be governed according to the laws
of the State of Minnesota.
10.02 Successors. This Agreement is personal to EXECUTIVE and EXECUTIVE may
not assign or transfer any part of his rights or duties hereunder, or any
compensation due to him hereunder,
to any other person. This Agreement may be assigned by KII. This Agreement is
binding on any successors or assigns of KII or JGK.
10.03 Waiver. The waiver by any party of the breach or nonperformance of
any provision of this Agreement by any other party will not operate or be
construed as a waiver of any future breach or nonperformance under any provision
of this Agreement or any similar agreement with any other employee.
10.04 Notices. Any and all notices referred to herein shall be deemed
properly given only if in writing and delivered personally or sent postage
prepaid, by certified mail, return receipt requested, as follows:
(a) To KII and JGK by notice to each member of KII's Board of
Directors, and to Xxxxxxxxxx & Xxxxx, P.A., 1100 International
Centre, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxxx.
(b) To EXECUTIVE at his home address as it then appears on the
records of KII or JGK, it being the duty of the EXECUTIVE to keep
KII and JGK informed of his current home address at all times.
The date on which notice to KII, JGK or EXECUTIVE shall be deemed to have been
given if mailed as provided above shall be the date on the certified mail return
receipt. Personal delivery to EXECUTIVE shall be deemed to have occurred on the
date notice was delivered to EXECUTIVE personally or deposited in a mail box or
slot or left with security or administrative personnel, at EXECUTIVE's residence
by a representative of KII or any messenger or delivery service.
10.05 Term. This Agreement shall be effective from April 7, 1997, to and
including December 31, 1999, and for one year periods thereafter until December
31, 2008, if not otherwise terminated in accordance with the provisions set
forth in this Agreement; provided, however, that if this Agreement does not
terminate earlier, it shall automatically terminate effective March 31, 2009.
10.06 Modification. This Agreement supersedes any and all prior oral and
written understandings, if any, between the PARTIES relating to the subject
matter of this Agreement. This Agreement sets forth the entire understandings
and agreements between and among the PARTIES and is the complete and exclusive
statement of the terms and conditions thereof, that there are no other written
or oral agreements in regard to the subject matter of this Agreement other than
those agreements, plans, programs and policies expressly referred to herein.
This Agreement shall not be changed or modified except by a written document
signed by the PARTIES hereto.
IN WITNESS WHEREOF, the PARTIES have hereunto set their hands as of the
date written above.
XXXXXXX INVESTMENTS, INC.
By /s/ Xxxxxxx X. Xxxxxx
Its Chairman
- and -
XXXX X. XXXXXXX AND COMPANY,
INCORPORATED
By /s/ Xxxxxx X. Xxxxxxx
Its Executive Vice President
- and -
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
