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EXHIBIT 10
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 23, 2002, is
entered into between Minnesota Mining and Manufacturing Company, a corporation
incorporated under the laws of Delaware, with its corporate headquarters in
St. Xxxx, Minnesota (the "Company") and Xxxxxxx X. Xxxxxxxx ("Executive").
WHEREAS, the Company desires to employ Executive to serve as its Senior
Vice President and Chief Financial Officer upon the terms and conditions set
forth herein, and Executive wishes to accept employment with the Company upon
such terms and conditions;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Company and Executive hereby agree as
follows:
1. TERM OF AGREEMENT.
(a) Employment Period. Subject to the termination provisions of this
Agreement, the term of Executive's employment under this Agreement (the
"Employment Period") will begin on February 1, 2002 (the "Commencement Date")
and end on the third anniversary of such Commencement Date. Except as
provided in this Agreement, if Executive remains employed by the Company
following the expiration of the Employment Period, his employment will be
governed by the same terms and conditions applicable to similar executives of
the Company and will not be governed by any provision of this Agreement.
(b) Survival. Upon the expiration or termination of this Agreement for any
reason, the provisions of this Agreement that by their terms survive such
expiration or termination shall continue in effect and will bind each of the
parties according to the terms thereof. Such provisions include, without
limitation, Sections 1, 5, 6, 8, 9, 10 and 11 hereof.
2. DUTIES. The Company shall employ Executive during the Employment
Period as its Senior Vice President and Chief Financial Officer. During the
Employment Period, excluding any periods of short-term disability, vacation or
sick leave to which he is entitled, Executive shall perform the duties of such
positions and such other duties as may be assigned to him by the Chief
Executive Officer of the Company (the "Chief Executive Officer"). In
performing such duties, Executive shall devote substantially all of his
business time, attention and effort to the affairs of the Company and shall
use his reasonable best efforts to promote the interests of the Company. As
part of performing such duties, Executive shall comply with all applicable
policies generally in effect for employees and senior executives of the
Company.
3. BASE SALARY. The Company shall pay Executive in accordance with the
normal payroll practices of the Company (but not less frequently than monthly)
an annual salary at a rate of $450,000 per year ("Base Salary") beginning on
the Commencement Date. During the Employment Period, the Base Salary shall be
reviewed at least annually and may be adjusted from time to time as determined
by the Compensation Committee of the Company's Board of Directors (the
"Committee").
4. PROFIT SHARING. In addition to the Base Salary described in Section 3
above, the Company shall pay to Executive additional variable compensation
pursuant to the Company's Executive Profit Sharing Plan. The amount of such
additional variable compensation will depend on the future performance of the
Company, as defined in such Plan, and is not guaranteed. Subject to the
foregoing, the number of plan shares initially assigned to Executive shall be
sufficient to produce annual planned compensation of $300,000. The Company
shall pay such profit sharing to Executive in the form of cash, restricted
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shares of common stock of the Company ("Common Shares") or a combination
thereof as determined by the Committee at such times and in such manner as is
consistent with the treatment of other senior executives of the Company and
with the provisions of such Executive Profit Sharing Plan.
5. SIGNING GRANTS.
(a) Stock Option. The Committee has granted to Executive, effective as of the
Commencement Date, an option (the "Initial Option") to purchase 24,000 Common
Shares at an exercise price equal to the fair market value of a Common Share
on the Commencement Date. The Initial Option will have a term of 10 years
from the date of grant, and will become exercisable in increments of one-third
on each of the first 3 anniversaries of the Commencement Date, so long as
Executive remains continuously employed by the Company. However, the Initial
Option will become exercisable in full immediately upon and may be exercised
up to two years following the death of the Executive, termination of his
employment due to Disability, termination without Cause or termination for
Good Reason. In addition, any portion of the Initial Option that has already
become exercisable by the date of termination may be exercised up to 90 days
following a termination by the Executive without Good Reason. In no event,
however, shall the Initial Option be exercisable after the expiration of its
10-year term. The Initial Option shall automatically expire immediately upon
a termination for Cause. In all other respects, the Initial Option shall be
subject to and governed by the terms of the Company's 1997 Management Stock
Ownership Program.
(b) Restricted Stock. The Committee has granted to Executive, effective as of
the Commencement Date, 3,000 restricted Common Shares (the "Restricted
Shares"). The Restricted Shares will vest in increments of one-third on each
of the first 3 anniversaries of the Commencement Date, so long as Executive
remains continuously employed by the Company. However, the Restricted Shares
will vest immediately upon the death of the Executive or termination of his
employment due to Disability. In addition, the vesting percentage of the
Restricted Shares will be increased by 33-1/3% upon a termination without
Cause or a termination for Good Reason. If the Company terminates Executive's
employment for Cause or if Executive terminates his employment (other than by
reason of death, Disability or Good Reason) prior to vesting in all the
Restricted Shares, the Shares which are not vested shall be automatically
forfeited on the date of termination unless the Committee in its sole
discretion elects to vest all or any portion of the unvested Shares. In all
other respects, the Restricted Shares shall be subject to and governed by the
terms of the Company's 1997 Management Stock Ownership Program.
6. STOCK OPTIONS. In May 2002 the Committee shall grant Executive an
option (the "2002 Option") to purchase a minimum of 18,000 Common Shares at an
exercise price equal to the fair market value of a Common Share on the date of
grant. The 2002 Option will have a term of 10 years from the date of grant,
and will become exercisable at the time specified by the Committee in
accordance with the provisions of the Management Stock Ownership Program in
effect at such time. However, the 2002 Option will become exercisable in full
immediately upon and may be exercised up to two years following the death of
the Executive, termination of his employment due to Disability, termination
without Cause or termination for Good Reason. In addition, any portion of the
2002 Option that has already become exercisable by the date of termination may
be exercised up to 90 days following a termination by the Executive without
Good Reason. In no event, however, shall the 2002 Option be exercisable after
the expiration of its 10-year term. The 2002 Option shall automatically
expire immediately upon a termination for Cause. In all other respects, the
2002 Option shall be subject to and governed by the terms of the Management
Stock Ownership Program in effect on the date of grant. The Committee shall
in its sole discretion consider Executive for possible future grants of stock
options in accordance with the provisions of the Management Stock Ownership
Program in effect at such time.
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7. PERFORMANCE UNITS. The Committee has granted to Executive, effective
as of the Commencement Date, units under the Company's Performance Unit Plan
with a par value equal to $288,000 (the "Initial Performance Units"). These
Initial Performance Units will have a 3-year performance period beginning
January 1, 2002 and ending December 31, 2004. The ultimate value of the
Initial Performance Units will depend on the performance of the Company during
the performance period, and is not guaranteed. The Initial Performance Units
will vest at the end of the 3-year performance period, so long as Executive
remains continuously employed by the Company. However, the Initial
Performance Units will vest immediately upon the Executive's death,
termination of his employment due to Disability, termination without Cause or
a termination for Good Reason prior to the end of the 3-year performance
period; provided that in such event, the value of such Units will be limited
to their par value multiplied by the ratio of the days the Executive was
employed by the Company to the total number of days from the Commencement Date
through December 31, 2004. The Committee shall in its sole discretion
consider Executive for possible future grants of performance units in
accordance with the provisions of the Performance Unit Plan in effect at such
time.
8. OTHER BENEFITS.
(a) Retiree Medical Benefits. The Company shall establish an opening account
balance for Executive under its retiree medical program equal to 36,000
retiree medical credits. In recognition of such opening account balance,
Executive will be eligible to earn additional retiree medical credits under
such program only for up to an additional ten years of employment with the
Company.
(b) Vacation. During his employment, Executive shall be entitled to earn and
receive paid vacation benefits in accordance with the Company's vacation plan
applicable to other senior executives of the Company; provided that in no
event shall Executive earn less than four weeks of vacation benefits per year.
(c) Gross Up for Excise Taxes. In the event that any payment made to
Executive pursuant to this Agreement is finally determined to be subject to
the excise tax imposed by section 4999 of the Internal Revenue Code of 1986 or
any similar tax payable under any federal, state or local law, then the
Company shall pay Executive an additional amount sufficient to fully satisfy
such excise tax and any additional federal, state and local income taxes
payable on the additional amount.
(d) Relocation Expenses. The Company will reimburse Executive for the
reasonable expenses of relocating his primary residence to the Minneapolis-St.
Xxxx area in accordance with the Company's relocation policy applicable to
senior executives. The Company will also assume any liability incurred by
Executive as a direct result of terminating the lease on his rental property
in Zurich, Switzerland.
9. SUPPLEMENTAL RETIREMENT BENEFIT.
(a) Amount. The Company will pay Executive additional pension benefits (the
"Supplemental Retirement Benefit") to supplement the pension benefits he will
be entitled to receive under the Company's and the General Motors pension
plans. The formula for this Supplemental Retirement Benefit, which is
expressed in the form of an annuity payable over his lifetime beginning when
he attains age 60, shall be:
One-twelfth of 45% of his highest average (4 years) annual earnings (base
salary plus profit sharing), multiplied by the following fraction, where the
numerator is the number of years Executive has been employed by the Company
(up to 10) and the denominator is 10,
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minus
(ii) the sum of the pension benefits Executive is actually receiving or is
entitled to receive under the Company's and the General Motors' qualified and
nonqualified defined benefit pension plans, in each case after converting the
benefits paid or payable under such plans to an Actuarially Equivalent annuity
payable for his lifetime commencing at his age 60.
Once Executive has completed two years of continuous employment with the
Company, the sum of the amount determined under the above formula and the
pension benefits paid or payable under the Company's pension plans shall not
be less than one-twelfth of $100,000.
(b) Vesting. Executive will become fully vested in the Supplemental
Retirement Benefit after he has completed five years of continuous employment
with the Company. However, the Supplemental Retirement Benefit will vest
immediately upon Executive's death, termination of his employment due to
Disability, a termination without Cause or a termination for Good Reason. If
Executive's employment terminates for any other reason prior to his completion
of five years of continuous employment with the Company, he will forfeit and
will not receive any portion of the Supplemental Retirement Benefit other than
the $100,000 minimum benefit described in the last sentence of paragraph (a)
above (which he shall receive only if he has completed at least two years of
continuous employment with the Company).
(c) Payment. Payment of the Supplemental Retirement Benefit shall begin at
the same time as and shall be made in the same form as Executive receives
payment of his monthly benefits from the Company's pension plans; provided,
however, that the amount of such monthly Benefit payments shall be Actuarially
Adjusted in the event payment begins before Executive has attained age 60 or
payment is made in a form other than an annuity payable over his lifetime. In
the event Executive will not receive any benefits under the Company's pension
plans (due to his death or termination of employment prior to vesting in such
benefits), the Company shall pay the Actuarial Equivalent of such Supplemental
Retirement Benefit in a single lump sum payment promptly following such event.
For purposes of the Supplemental Retirement Benefit, the terms "Actuarially
Equivalent" or "Actuarially Adjusted" shall mean making one benefit of
equivalent value to another benefit using the interest rate and mortality
assumptions then in effect under the Company's pension plans. Payments of the
Supplemental Retirement Benefit will be made from the Company's general
assets, and not from any trust funding the Company's pension plans.
10. TERMINATION BENEFITS.
(a) Termination without Cause or for Good Reason. The Company may terminate
Executive's employment without Cause or Executive may terminate his employment
for Good Reason. In such event, the Company shall pay to Executive promptly
after the date of termination a lump sum cash amount equal to (a) two times
his then current annual Base Salary and annual planned profit sharing if such
termination occurs during the first five years following the Commencement
Date, or (b) one times his then current annual Base Salary and annual planned
profit sharing if such termination occurs more than five but no more than ten
years following the Commencement Date. Executive's right to the payment
described in the preceding sentence will be contingent upon his execution of a
general release of all claims against the Company, in a form mutually
acceptable to Executive and the Company.
(b) Termination for Cause, upon Disability or other than for Good Reason.
During the Employment Period and thereafter, the Company may terminate
Executive's employment for Cause or in the event of Executive's Disability,
and Executive may terminate his employment for other than Good Reason. In
such event, Executive shall only be entitled to receive the Base Salary,
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profit sharing and other benefits he has accrued through the date of
termination and Executive shall not be entitled to receive any severance
payment.
(c) Termination upon Death. Executive's employment will automatically
terminate in the event of his death. In such event, Executive shall only be
entitled to receive the Base Salary, profit sharing and other benefits he has
accrued through the date of termination and Executive shall not be entitled to
receive any severance payment.
(d) Exclusive Remedy. The amounts described in this Section 10 shall be
Executive's exclusive remedy for any damages resulting from a termination of
his employment for any reason.
(e) Definitions. For purposes of this Agreement:
(i) The term "Cause" means any one of the following:
(A) Executive's indictment on or conviction of any felony or a misdemeanor
involving fraud, dishonesty or moral turpitude,
(B) Executive's material breach of this Agreement, provided that such breach
will not constitute Cause if Executive cures the breach within 10 days after
delivery to the Executive of a written notice from the Chief Executive Officer
specifying the breach,
(C) the willful and intentional material misconduct by Executive in the
performance of his duties under this Agreement, or
(D) the willful or intentional failure by Executive to materially comply with
a specific, written directive of the Chief Executive Officer that is
consistent with normal business practice and Executive's responsibilities
under this Agreement;
The term "Disability" means a mental or physical illness or injury which
renders Executive unable or incompetent to carry out the material job
responsibilities or the material duties of Executive's position, with or
without reasonable accommodation, and which is expected to last for a duration
in excess of six months; and
(iii) The term "Good Reason" means any one of the following events unless
Executive otherwise agrees in writing:
(A) the Company reduces Executive's total annual planned compensation (Base
Salary plus profit sharing) by more than 15%;
(B) Executive is relocated to a primary work site located outside of a 50-mile
radius of his then current work site; or
(C) Executive is reassigned to a position having primary responsibilities
which are significantly less than those of his immediately prior position;
provided, however, that none of the above events will constitute Good Reason
if the Company cures such event within 10 days after delivery of a written
notice from Executive specifying the Good Reason.
11. MISCELLANEOUS.
(a) Employee Agreement. In return for the Company's agreement to employ him
and its execution of this Agreement, Executive has agreed to enter into and
will on the Commencement Date sign the Employee Agreement provided by the
Company.
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(b) Confirmation. By signing this Agreement, Executive confirms that he is
under no contractual commitments inconsistent with his obligations set forth
in this Agreement and that, during the Employment Period, he will not perform
services for any other corporation, firm, entity or person that are
inconsistent with the provisions of this Agreement.
(c) Enforcement. In the event of a dispute over the amounts payable under
this Agreement, the prevailing party will be entitled to reimbursement from
the other party for its reasonable attorneys' fees and other expenses incurred
in resolving such dispute.
(d) Entire Agreement; Amendment. This Agreement contains the entire agreement
of the parties relating to Executive's employment by the Company and the other
matters discussed herein, and it supersedes all prior promises, contracts,
agreements and understandings of any kind, whether express or implied, oral or
written, with respect to such subject matter. The parties hereto have made no
agreements, representations or warranties relating to the subject matter of
this Agreement that are not set forth herein. This Agreement may not be
amended or modified except by a written instrument executed by the parties.
(e) Currency and Taxes. All monetary amounts stated in this Agreement are
expressed and shall be payable in United States dollars. The Company shall
withhold from any amounts payable pursuant to this Agreement all federal,
state and local taxes required by law to be withheld from such payments.
(f) Assignment; Successors. Executive may not assign his rights and
obligations under this Agreement without the prior written consent of the
Company. This Agreement shall be binding upon and inure to the benefit of
Executive, his estate and beneficiaries, the Company and its successors and
assignees.
(g) Severability. If all or any part of this Agreement is declared by any
court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any provision so declared to be unlawful
or invalid shall, if possible, be construed in a manner which will give effect
to the terms of such provision to the fullest extent possible while remaining
lawful and valid.
(h) Governing Law/Venue. This Agreement is made under and shall be governed
by and construed in accordance with the laws of the State of Minnesota without
regard to its or any other forum's choice of law principles. The parties
agree that any litigation in any way relating to this Agreement or to
Executive's employment with the Company, including but not limited to the
termination of this Agreement or of Executive's employment, will be venued in
the State of Minnesota, Xxxxxx County District Court, or the United States
District Court for the District of Minnesota. Executive and the Company hereby
consent to the personal jurisdiction of these courts and waive any objection
that such venue is inconvenient or improper.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first written above.
Minnesota Mining and Manufacturing Company Executive
By /s/ W. Xxxxx XxXxxxxx, Xx. /s/ Xxxxxxx X. Xxxxxxxx
W. Xxxxx XxXxxxxx, Xx. Xxxxxxx X. Xxxxxxxx
Chief Executive Officer
