EMPLOYMENT AGREEMENT
EFFECTIVE DATE: November 2, 1996
PARTIES: Northwest Teleproductions, Inc. ("Northwest")
0000 X. 00xx Xxxxxx
Xxxxx, Xxxxxxxxx 00000
Xxxx X. XxXxxxx ("Executive")
0000 Xxxx Xxxx
Xxxxx, Xxxxxxxx 00000
RECITALS:
A. The following recitals shall be considered a part of this Agreement and
explain the general nature and purposes of Northwest's business and the
Executive's rights and obligations under this Agreement. Any interpretation or
construction of this Agreement shall be considered in light of these recitals.
B. Northwest and its affiliates are engaged in the specialized and highly
competitive business of production of videotape and film television programs for
broadcast and cable, corporate communications, advertising and commercial
programs and creative production services such as sound, special effects,
animation, graphics resources, and post production services.
C. Northwest and its affiliates, through their research, creativity and
experience, have developed and acquired valuable Confidential Information (as
hereinafter defined), including valuable trade secrets.
D. Northwest has disclosed and will continue to disclose the valuable
Confidential Information to Executive during his employment, and Executive will
otherwise be exposed to, come in contact with, help create, and be required to
use such Confidential Information.
E. Executive desires to enter into this Agreement for employment with
Northwest in which he may contribute to and receive Confidential Information,
and acknowledges that Northwest will suffer irreparable harm if Executive, after
developing, obtaining or becoming familiar with any Confidential Information,
makes any unauthorized disclosure or communication of any Confidential
Information to any third party or uses any Confidential Information in
competition with Northwest while employed or after the termination of his
employment.
F. Executive recognizes, agrees and understands that execution of this
Agreement is an express condition of his employment by Northwest.
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G. The parties desire to set forth their understanding and agreements with
respect to the terms of Executive's employment by Northwest.
THEREFORE, in consideration of the employment of Executive by Northwest and
compensation herein described or made available later to Executive by Northwest,
Executive and Northwest agree as follows:
AGREEMENTS:
ARTICLE 1.
DEFINITIONS
1.01 Confidential Information. For the purposes of this Agreement,
"Confidential Information" means any information relating to Northwest or its
business not generally known to the public or proprietary to Northwest and
includes, without limitation, trade secrets, inventions, and information
pertaining to research, development, methods, processes, techniques,
engineering, purchasing, marketing, selling, accounting, licensing, copyrights
and pending copyrights, business systems, business techniques, customer lists,
prospective or potential customer lists, price lists, business strategies and
plans. For example, and without limiting the foregoing, Confidential Information
may be contained in Northwest's marketing plans or proposals, customer lists,
prospective or potential customer list, the particular needs and requirements of
customers, the particular needs and requirements of prospective or potential
customers, and the identity of customers or prospective or potential customers.
Information relating to Northwest or its business shall be treated as
Confidential Information irrespective of its source and any information which is
identified as being "confidential" or "trade secret" shall be presumed to be
Confidential Information.
ARTICLE 2.
EMPLOYMENT, COMPENSATION AND BENEFITS
2.01 Term of Employment. Northwest hereby agrees to employ Executive as its
President and Chief Executive Officer for a term commencing as of November 2,
1996 and continuing to October 31, 1998 unless earlier terminated pursuant to
Article 5 hereof. Thereafter, the Agreement shall renew annually, for one year
periods, beginning November 1, 1998 unless either party gives sixty (60) days
written notice of the intent not to renew the Agreement or terminates pursuant
to Article 5 hereof.
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2.02 Duties and Supervision. During the Term of Executive's employment by
Northwest, Executive agrees to devote his full-time best efforts to the business
and affairs of Northwest, and agrees to perform such services and duties as may,
from time to time, be assigned to him by the Board of Directors of Northwest.
Executive shall be responsible for, among other things, determining objectives
for the company, allocating and organizing resources for achieving such
objectives, formulating plans and policies, interpreting and applying such
policies, determining allocation of duties and authorities of subordinates, and
exercising control to see that objectives are achieved in accordance with basic
organizational policy. Executive shall be held fully accountable for the results
of the company. During the term of Executive's employment with Northwest,
Executive will not perform services for any other person, firm or corporation,
as an employee, agent, independent contractor, or in any other capacity, without
the express consent of the Board of Directors of Northwest. Executive agrees to
comply in every respect with the general standards and policies of Northwest in
effect from time to time, all of which Northwest reserves the right to change in
its sole discretion.
2.03 Compensation. Northwest shall pay to Executive, or provide for payment
or delivery of, the following compensation and consideration for services
rendered by Executive:
2.03.1 Base Salary. During the term of the Agreement, Northwest shall
pay Executive an annual base salary of Two Hundred Thousand
Dollars ($200,000), subject to withholding and other appropriate
deductions, payable in accordance with Northwest's normal payroll
practices in effect from time to time.
2.03.2 Bonus. For the fiscal year beginning 4/01/97 and each fiscal
year thereafter, a Management Incentive Bonus will be earned by
Executive for such fiscal year, provided Executive is a Northwest
employee on the last day of such fiscal year. The Management
Incentive Bonus shall be based upon 5% of the pre-tax earnings
for the fiscal year in excess of 8% of shareholder equity at the
beginning of the fiscal year, up to a maximum of 50% of
Executive's base salary with a minimum of Twenty Thousand Dollars
($20,000.00).
Executive shall earn a bonus for the current fiscal year
beginning 4/01/96 based on the formula described in this
paragraph 2.03.2, but pro rated based on the number of full
months worked by Executive during such fiscal year.
The Management Incentive Bonus earned by Executive for any fiscal
year shall be determined, and earned upon completion of
Northwest's annual audit by its independent certified public
accountants. As such, Bonuses earned by Executive shall be
credited to a deferred compensation account and shall be subject
to the terms and conditions contained in the Deferred
Compensation Agreement attached hereto as Exhibit A.
The full bonus amount shall be credited to an account for
Executive's behalf under the Agreement set forth in Exhibit A.
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2.03.3 Discretionary Allowance. The Company will not provide a car or
allowance for such purchase, lease, insurance, maintenance, gas
or other automobile related expenses.
A monthly payment of $1,250.00, less required withholding and
appropriate deductions, will be paid to Employee without
designated use.
2.03.4 Long Term Incentive. Upon the date Executive becomes an
employee of Northwest, Executive shall be granted an incentive
stock option for 50,000 shares pursuant to the 1993 Northwest
Teleproductions, Inc. Stock Option Plan ("Plan"), vesting to the
extent of one-third of the total number of shares each year
beginning on the first anniversary of the date of grant, and
exercisable for a five-year term. The per share exercise price
shall equal the fair market value (as defined in the Plan) of
Northwest's common stock on the date of grant. Executive and
Northwest shall execute a separate Incentive Stock Agreement
setting forth all other terms and conditions of the incentive
stock option.
2.03.5 Subordinated Notes. Executive shall have the right, subject to
his execution of the attached Subscription Agreement, to
purchase, within 60 days of commencement of Executive's
employment, up to $150,000 principal amount of 10-1/2%
Subordinated Notes authorized and offered by Northwest's Board of
Directors to a limited number of investors and to receive, as
part of such Note purchase, a Warrant to purchase, at an exercise
price of $2.50 per share, the number of shares of Common Stock of
Northwest as is equal to the principal amount of the Note so
purchased by Executive divided by the Warrant exercised priced.
2.03.6 Relocation. Upon initial relocation to the Twin Cities for
employment, Northwest will pay all direct, out of pocket moving
expenses of Executive related to moving Executive's household
goods, provided Executive first obtains two competing bids for
such moving expenses.
Reasonable expenses for a family visit to the Twin Cities for the
purpose of "house hunting" shall be paid by Northwest.
Necessary travel and living expenses of the Executive shall be
paid by Northwest for up to two months while Executive
establishes a Twin Cities residence.
2.04 Other Executive Benefits. Northwest agrees to provide the following
benefits to Executive.
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2.04.1 Vacation. Executive shall be entitled to four (4) weeks of paid
vacation during each twelve (12) month period of employment.
2.04.2 Expenses. Northwest shall reimburse Executive for all
documented reasonable and necessary out-of-pocket expenses
incurred in connection with performance of his duties and
obligations to Northwest hereunder.
2.04.3 Other Benefits. Northwest shall provide to Executive
participation in any other employee benefit programs made
available to employees generally from time to time as established
in the exclusive discretion of Northwest's Board of Directors or
authorized delegates of the Board of Directors. Such benefits may
include, but are not limited to health insurance, dental
insurance, life insurance, paid holidays and participation in
qualified retirements plans. Northwest retains the sole
discretion to amend, modify, or discontinue any and all benefit
plans.
ARTICLE 3.
PROTECTION OF TRADE SECRETS AND
CONFIDENTIAL BUSINESS DATA
3.01 Scope. The definition of "Confidential Information" as set forth in
Article 1, Paragraph 1.01, is not intended to be exhaustive. From time to time
during the term of his employment, Executive may gain access to or help create
other information concerning Northwest's business of commercial value to
Northwest, which information shall be included in the definition under Article
1, Paragraph 1.01, above, even though not specifically listed in that Paragraph.
The definition of Confidential Information and the provisions of this Article 3
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.
3.02 Confidentiality. Executive promises and agrees that the Confidential
Information, including trade secrets and/or data, will be held in the strictest
confidence and will never, without prior written consent of Northwest, be
(directly or indirectly) disclosed, assigned, transferred, conveyed,
communicated to or used for his own or another's benefit or (directly or
indirectly) disclosed, assigned, transferred, conveyed, communicated to, or used
by him, a competitor of Northwest 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 Northwest or at any time
after his termination of employment with Northwest, regardless of the reason for
Executive's termination, whether voluntary or involuntary. Executive further
promises and agrees that he will develop and enforce such policies and
procedures as are necessary to protect Northwest's Confidential Information and
will faithfully implement and abide by any and all policies and procedures which
may be established by Northwest to insure the confidentiality of the
Confidential Information, including but not limited to, rules, polices,
practices or procedures:
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3.02.1 (a) Limiting access to authorized personnel;
3.02.2 (b) Limiting copying of any writing, data or recording;
3.02.3 (c) Requiring storage of property, documents or data in secure
facilities provided by Northwest and limiting safe or vault lock
combinations or keys to authorized personnel; and/or
3.02.4 (d) Check out and return of other procedures promulgated by
Northwest from time to time.
3.03 Return of Information. Upon termination of the employer-employee
relationship, whether voluntary or involuntary, Executive will return to
Northwest any and all written or otherwise recorded form of all Confidential
Information (and any copies thereof) in his possession, custody or control, as
defined in Article 1, Paragraph 1.01, including, but not limited to notebooks,
software, memoranda, specifications, customer lists, prospective or potential
customer lists, or price lists, and will take with him, upon leaving Northwest's
place of business or employment with Northwest, no such information, property,
or reproduction thereof in any form which may have been entrusted to or obtained
by him during the course of his employment or to which he had access,
possession, custody or control. Upon termination of employment, whether
voluntary or involuntary, Executive will deliver to Northwest all Confidential
Information in recorded form in his property, devices, parts, mock-ups and
finished or unfinished product, machinery, or equipment in his possession,
custody or control.
Executive shall also deliver, upon his termination, whether voluntary or
involuntary, all records, software, drawings, blueprints, notes, notebooks,
memoranda, specifications and documents or data in any form, which contain
Confidential Information.
3.04 Copyrights. Executive acknowledges that any computer software, program
or other work of authorship prepared by Executive for Northwest's benefit or at
Executive's request shall be considered a "work made for hire" under U.S.
copyright laws. To the extent that any such work of authorship cannot be
considered a "work made for hire," Executive agrees to assign and hereby does
assign all right, title and interest in and to such work to Northwest.
3.05 Invention. "Invention" means any invention, discovery, improvement, or
idea, whether patentable or copyrightable or not, and whether or not shown or
described in writing or reduced to practice.
3.06 Disclosure and Assignment. Executive shall promptly and fully disclose
in writing to Northwest, and will hold in trust for Northwest's sole right and
benefit, any Invention that Executive, during the period of employment and for
one year thereafter, makes, conceives, or reduces to practice or cause 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;
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b. Relates to or is directly or indirectly connected with
Northwest's business, products, processes, or Northwest's
Confidential Information; or
c. Involves the use of any of Northwest's time, material, or
facility.
Executive will keep accurate, complete, and timely records for such Inventions,
which records shall be Northwest's property and shall not be removed from
Northwest's premises. Executive hereby assigns to Northwest all of his right,
title, and interest in and to all such Inventions and, upon Northwest's request,
Executive shall execute, verify, and deliver to Northwest such documents,
including without limitation, assignments and patent applications, and shall
perform such other acts, including, without limitation, appearing as a witness
in any action brought in connection with this Agreement that are necessary to
enable Northwest to obtain the sole right, title, and benefit to all such
Inventions.
3.07 Notice of Excluded Inventions. Executive further agrees, and is hereby
notified, that the above agreement to assign Inventions to Northwest does not
apply to any Invention for which no equipment, supplies, facility, or Northwest
Confidential Information was used, which was developed entirely on Executive's
own time, and
a. Which does not relate:
(i) Directly to Northwest's business; or
(ii) To Northwest's actual or demonstrably anticipated research
or development; or
b. Which does not result from any work performed by Executive for
Northwest.
ARTICLE 4.
COVENANT NOT TO COMPETE
4.01 Actions Prohibited. At no time during the term of this Agreement or
for a period of one (1) year immediately following the termination of
Executives's employment (whether voluntary or involuntary), will Executive:
4.01.1 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 Northwest with whom Executive (or other employees of
Northwest under his supervision), during the twelve (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
Northwest; and
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4.01.2 In any way, directly or indirectly, render any services, advice
or counsel, as an owner, employee, partner, representative,
agent, independent contractor, consultant, or in any other
capacity, for any party or on his own behalf, if the rendering of
such services, advice or counsel involves, requires or is likely
to result in the use or disclosure by Executive of any
Confidential Information; and
4.01.3 Acting on behalf of himself, another business or entity, or a
competitor, solicit or hire any person employed by Northwest at
any time during the twelve (12) months prior to his termination.
ARTICLE 5.
TERMINATION OF EMPLOYMENT
5.01 Notwithstanding anything to the contrary elsewhere in this Agreement,
Executive's employment shall terminate, whether during the initial term or any
subsequent renewal term:
5.01.1 Upon mutual written agreement of the parties.
5.01.2 Upon the death of Executive.
5.01.3 Upon the physical or mental disability of Executive to such an
extent that he is generally unable to, with or without reasonable
accommodation, perform the essential functions of his job and
usual and customary duties and such inability continues for a
period of two (2) months or more.
5.01.4 Upon written notice to Executive by Northwest in the event of
Executive's final nonappealable conviction of or entry of a plea
of guilty or nolo contendere to any felony or the final
nonappealable entry of any civil judgment against him in
connection with any allegation against him of (a) fraud or
misrepresentation relating to Northwest or its business, or (b)
embezzlement.
5.01.5 Upon written notice to Executive by Northwest in the event of
Executive's willful and repeated misconduct in not following the
reasonable directions of the Board of Directors or willful
failure to perform his duties if Executive does not correct such
misconduct or failure within a period of ten (10) days after
written notice thereof from Northwest specifying the nature of
such misconduct or failure and demanding that it be cured.
5.01.6 Upon Executive's making a material false statement to the Board
of Directors or in matters relating to Northwest's business, as
determined by a majority vote of the Board of Directors,
excluding Executive.
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5.01.7 Upon 60 days written notice by Executive without cause.
5.01.8 Upon 60 days written notice by Northwest without cause.
5.02 Decision and Waiver. Any determination by Northwest to terminate
Executive's employment with Northwest as outlined above must be made by a
majority decision of the Board of Directors. Nonexercise by Northwest of its
right to terminate Executive's employment pursuant to the subsections above
shall not constitute a waiver by Northwest of its right to terminate Executive's
employment pursuant to such subsections.
5.03 Continuing Payments. If Executive's employment is terminated pursuant
to paragraph 5.01.1, 5.01.2, 5.01.3, 5.01.4, 5.01.5, 5.01.6 or 5.01.7, then upon
such termination or nonrenewal Northwest shall have no further obligation or
liability to Executive whatsoever, except for accrued benefits and any
compensation earned through Executive's last day of employment. If Executive's
employment is terminated pursuant to paragraph 5.01.8 or nonrenewed by Northwest
pursuant to paragraph 2.01, then Northwest's only liability or obligation to
Executive shall be: (1) for accrued benefits and (2) the greater of (i)
Executive's base salary as defined in paragraph 2.03.1, at regular intervals,
for the unexpired initial term of employment or, if the Agreement has been
renewed, for the unexpired portion of such one-year renewal term, or (ii) the
one-year period described in paragraph 4.01 above, so long as Executive abides
by the restrictions contained in 4.01 during such one-year period.
5.04 Change of Control. If Executive's employment is terminated pursuant to
paragraph 5.01.7 or 5.01.8 within one year of a "change of control" as that term
is defined in the Deferred Compensation Agreement attached hereto as Exhibit A,
then this paragraph 5.04, instead of paragraph 5.03, shall govern which
payments, if any, are due Executive. If Executive's employment is terminated
pursuant to paragraph 5.01.7 or 5.01.8 within one year of a "change of control,"
then Northwest's only liability or obligation to Executive shall be: (1) for
accrued benefits and (2) Executive's base salary as defined in paragraph 2.03.1,
at regular intervals, for the greater of (i) the unexpired initial term of
employment or, if the Agreement has been renewed, for the unexpired portion of
such one-year renewal term, or (ii) the one-year period described in paragraph
4.01 above, so long as Executive abides by the restrictions contained in 4.01
during such one-year period; provided, however, that Executive shall not be
entitled to receive any payments under this paragraph 5.04 or any other
agreement with Northwest which would, with respect to Executive, constitute a
"parachute payment" for purposes of Internal Revenue Code Section 280G. In the
event any payments under this paragraph 5.04 or any other agreement with
Northwest would, with respect to Executive, constitute a "parachute payment,"
Executive shall have the right to designate those payments to Executive, whether
under this Agreement and/or any other agreement with Northwest, which should be
eliminated so that Executive will not receive a "parachute payment."
5.05 Mitigation. If Executive is entitled to continuing payments pursuant
to paragraph 5.03 or 5.04, Executive shall not be obligated to seek other
employment to receive such payments and such payments shall not be reduced by
any income from other sources received by Executive.
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ARTICLE 6.
MISCELLANEOUS
6.01 Remedies. The parties acknowledge that Northwest will suffer
irreparable harm if the Executive breaches Article 3 and/or 4 of this Agreement,
either during or after its term. Accordingly, Northwest shall be entitled, in
addition to any other right and remedy it may have, at law or equity, to
injunctive relief, without the posting of a bond or other security, enjoining or
restraining Executive from any violation of this Agreement, and Executive hereby
consents to Northwest's right to the issuance of such injunction. If Northwest
institutes and prevails in any such action against Executive to enforce Article
3 and/or 4 of this Agreement, alone or in conjunction with any third party or
parties to enforce any terms or provisions of this Agreement, Executive shall
pay Northwest its reasonable attorneys' fees incurred in instituting and
maintaining such action and all costs and expenses incurred in connection
therewith.
6.02 Severability. The parties agree that, in the event that a court of
competent jurisdiction determines that any of the provisions of this Agreement
are unreasonable, it may limit such provisions to the extent it deems
reasonable, without declaring the provision or this Agreement invalid in its
entirety. This provision shall not be construed as an admission by Northwest,
but is only included to provide Northwest with the maximum possible protection
for its business, Confidential Information, trade secrets and data.
6.03 Modification. This Agreement supersedes any and all oral and written
negotiations, agreements and understandings, if any, between the parties
relating to the subject matter of this Agreement. The parties agree that this
Agreement sets forth the entire understanding and agreement between 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. This Agreement shall not be changed or modified except
by a written document signed by the Parties hereto.
6.04 Successors. This Agreement is personal to Executive and Executive may
not assign or transfer any part of the rights or duties or any compensation due
to him hereunder, to any other person. This Agreement may be assigned by
Northwest.
6.05 Waiver. The waiver by Northwest of the breach or nonperformance of any
provisions of this Agreement by Executive shall not operate or be construed as a
waiver of any future breach or nonperformance under any provisions of this
Agreement.
6.06 Survival. Executive and Northwest agree that the provisions of this
Agreement that expressly extend beyond the termination of Executive's
employment, particularly Articles 3 and 4, shall continue in full force and
effect after termination of this Agreement or Executive's employment.
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6.07 Governing Law. This Agreement shall be governed according to the laws
of the State of Minnesota.
IN WITNESS WHEREOF, the parties have executed this Agreement in the manner
appropriate to each on the date indicated.
NORTHWEST TELEPRODUCTIONS, INC.
By /s/ Xxxx X. Xxxxxxx
Its Chairman
Subscribed and sworn to before me
this 4th day of November, 1996. Dated: November 4, 1996
/s/ Xxxxxxx X. Xxxx
Notary Public
/s/ Xxxx X. XxXxxxx
XXXX X. XXXXXXX
Subscribed and sworn to before me
this 2nd day of November, 1996. Dated: November 2, 1996
/s/ Xxxxxx X. Xxxxx
Notary Public
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