1
Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of November 30, 2000, by and between Health
Fitness Corporation, a Minnesota corporation, (hereinafter called "HFC"), and
Xxxxx Xxxxx (hereinafter called "Executive"):
RECITALS
1. Executive desires to be employed by HFC and HFC desires to employ
Executive on the terms stated in this Agreement.
2. Executive acknowledges that he has been notified and recognizes
that execution of this Agreement, including specifically the restrictive
covenants contained in Article V of this Agreement, is an express condition of
his employment with HFC.
NOW, THEREFORE, in consideration of HFC 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
HFC, Executive and HFC agree as follows:
ARTICLE I
DEFINITION
1.01 Change of Control. For purpose of this Agreement, the phrase
"Change of Control" means some individual, group, or institution other than
existing HFC or future employee-related programs of HFC or its subsidiaries
acquiring over 50% of the voting equity of HFC, but not including (a) a
transaction initiated by HFC for the purpose of raising equity; (b) a
transaction initiated by HFC where HFC is the surviving entity and Executive is
the Chief Executive Officer of HFC after the transaction; or (c) a transaction
initiated by an individual, group, or institution acting on the behalf of or in
concert with Executive.
ARTICLE II
EMPLOYMENT, COMPENSATION AND BENEFITS
2.01 Employment With HFC. HFC hereby hires Executive in the position
of President and Chief Executive Officer and Executive hereby accepts such
employment with HFC. Such employment shall continue indefinitely until
terminated in accordance with Article III of this Agreement.
2.02 Duties.
(a) Subject to Section 2(c) of the Amendment to Separation
Agreement and Release between Executive and Starmark Northwest
Management, L.L.C., Executive agrees, during his employment, to
devote his full time and best efforts to
-1-
2
the business of HFC, including, without limitation, the
performance of those duties and responsibilities reasonably and
customarily associated with his position such as, but not limited
to, those duties and responsibilities associated with increasing
HFC's profitability, revenue growth and stock price; provided,
however, that Executive's duties and responsibilities shall be
subject to determination by HFC's Board of Directors. Executive
shall be granted such powers and authority as are reasonably and
customarily associated with his position.
(b) Executive shall report to, and at all times shall be subject
to the direction of, HFC's Board of Directors.
(c) Executive, at all times during his employment with HFC, shall
comply with HFC's reasonable standards, regulations and policies
as determined or set forth by the HFC Board of Directors from
time to time and as applicable to senior executive employees of
HFC.
(d) HFC hereby acknowledges Executive's duties under Section 2(c)
of the Amendment to Separation Agreement and Release between
Executive and Starmark Northwest Management, L.L.C. However,
subject to Section 2(c) of the Amendment to Separation Agreement
and Release, Executive acknowledges and agrees that he shall not
allow such duties to interfere with his duties and
responsibilities to HFC under this Agreement. Executive further
acknowledges and agrees that he shall not use HFC's resources,
human or otherwise, to accomplish those duties under Section 2(c)
of the Amendment to Separation Agreement and Release.
(e) Notwithstanding subparagraph 2.02(a) of this Agreement, if
HFC is acquired by or to be acquired by a competitor of Starmark
Northwest Management, L.L.C. and such acquisition is reasonably
expected to close prior to October 29, 2001 (the expiration of
the Non-Compete Period under Section 9 of the Separation
Agreement and Release and Section 2(d) of the Amendment to
Separation Agreement and Release between Executive and Starmark
Northwest Management, L.L.C.), HFC will recuse Executive from his
duties and responsibilities for HFC through the expiration of the
Non-Compete Period. If such recusal is necessary, HFC will
continue to pay Executive his then current base salary and
provide those fringe benefits described below in Paragraph 2.06
during the period in which Executive is recused. However, if
Executive's employment with HFC terminates pursuant to
subparagraph 3.01(h) of this Agreement within sixty (60) days
following the recusal period, any salary continuation Executive
received during the recusal period under this subparagraph
2.02(e) shall be counted toward any separation pay Executive may
be entitled to under subparagraph 3.02(c). For example, if
Executive receives salary continuation for a period of five (5)
months during a period of recusal under this subparagraph
2.02(e), Executive's employment terminates pursuant to
subparagraph 3.01(h) within sixty (60) days following the recusal
period, and Executive is entitled to twenty-four (24) months of
separation pay pursuant to subparagraph 3.02(c)(iii),
-2-
3
Executive would receive nineteen (19) months of separation pay
under subparagraph 3.02(c)(iii).
2.03 Outside Activities. Subject to Section 2(c) of the Amendment to
Separation Agreement and Release between Executive and Starmark Northwest
Management, L.L.C., Executive shall not engage in any outside activities that
conflict or appear to conflict with HFC's interests, or that interfere in any
way with Executive's performance of his duties hereunder. In addition, Executive
shall not engage in any activity that might subject HFC to criticism or adverse
publicity, that might interfere with his normal work schedule, or that might
interfere with his job duties. Moreover, Executive shall not, and hereby agrees
not to, accept remuneration of any kind from his participation in any outside
activities.
2.04 Annual Base Salary. Executive's initial annual base salary shall
be calculated on the gross amount of U.S. $230,000 per year, less withholding
for income and FICA taxes and any other proper deductions. Executive's annual
base salary will be paid to him in accordance with HFC's normal payroll
practices. Future increases to annual base salary, if any, shall be reviewed
from time to time by the Board of Directors and determined by the Board of
Directors, in its sole discretion.
2.05 Stock Options. Executive and HFC shall enter into a separate
Incentive Stock Option Agreement ("ISOA").
2.06 Fringe Benefits. HFC shall provide the following fringe benefits
to Executive so long as he is employed by HFC or as otherwise required by law:
(a) Annual Bonus Compensation.
(i) Calendar Year 2001. Executive shall be eligible to
receive bonus compensation of up to sixty percent (60%) of
Executive's annual base salary based on HFC's achievement of
certain pre-determined audited annual earnings before interest,
taxes, depreciation, and amortization ("EBITDA") for calendar
year 2001 (January 1, 2001 -- December 31, 2001). For calendar
year 2001, HFC's Board of Directors has approved the following
bonus compensation criteria:
AUDITED EBITDA AMOUNT OF BONUS COMPENSATION
------------------------- ------------------------------------------------------
$2,700,000 - $2,799,999 Ten percent (10%) of annual base salary - ($23,000)
$2,800,000 - $2,899,999 Twenty percent (20%) of annual base salary - ($46,000)
$2,900,000 - $3,000,999 Thirty percent (30%) of annual base salary - ($69,000)
$3,100,000 - $3,299,999 Forty percent (40%) of annual base salary - ($92,000)
$3,300,000 - $3,499,999 Fifty percent (50%) of annual base salary - ($115,000)
$3,500,000 and over Sixty percent (60%) of annual base salary - ($138,000)
(ii) Subsequent calendar years. Executive shall be eligible
to receive annual bonus compensation for each full calendar year
of Executive's employment following calendar year 2001 in
accordance with the terms and conditions of this subparagraph
2.06(a). However, the EBITDA goals for calendar year 2001
outlined above shall be inapplicable in subsequent calendar
years. Rather, for each
-3-
4
subsequent calendar year, HFC's Board of Directors shall
determine, in its sole discretion, either to adopt new EBITDA
goals and bonus compensation criteria or to change the nature of
the bonus compensation criteria from the current EBITDA based
system to a system based on other factors. Executive will be
notified of the next calendar year's bonus structure and criteria
within thirty (30) days of the approval of the next year's budget
by the Board of Directors.
(iii) Payment of Bonus Compensation. Executive's bonus
compensation, if any, will be paid to him in a lump sum within
fifteen (15) days following the completion of the audit of the
most recently concluded calendar year. Executive's bonus
compensation, if any, shall be subject to withholding for income
and FICA taxes and any other proper deductions. Notwithstanding
anything to the contrary, HFC's payment of bonus compensation to
Executive in the event Executive does not remain in HFC's employ
for the full then current calendar year shall be controlled by
Paragraph 3.02(d) of this Agreement.
(b) Executive shall be eligible for paid vacation time in
accordance with HFC's standard vacation practices and policies.
In addition, Executive may be eligible for additional paid time
off in accordance with HFC's standard paid time off practices and
policies.
(c) Executive shall be eligible to participate in all other
employee benefit plans and programs offered by HFC from time to
time, including, but not limited to, any medical, dental,
short-term disability, long-term disability and life insurance
coverage, or retirement plans, in accordance with the terms and
conditions of those benefit plans and programs.
(d) HFC shall pay, on behalf of Executive, the cost of Executive
and his wife's initial social/tennis membership fee at a country
club of Executive's choosing, provided such fee does not exceed
$2,500. HFC shall also pay, on behalf of Executive, the monthly
membership fee assessed to Executive in connection with such
membership for as long as Executive remains employed by HFC,
provided such fee does not exceed $200 per month. Such payments
shall be subject to withholding for income and FICA taxes. HFC
shall not pay for or reimburse Executive for the cost of other
country club related expenses such as, but not limited to, the
cost of food or alcohol consumed at the country club, or any
other use or incidental fees assessed to Executive as member of
the country club other than the membership fees.
(e) HFC shall pay Executive $500.00 per month to cover all costs
he incurs in connection with his use of his personal automobile
for business purposes, whatever they may be. Such payment shall
be subject to withholding for income and FICA taxes and any other
proper deductions. In light of such payments, HFC will not
reimburse Executive for the cost of gasoline, repairs,
maintenance insurance, mileage or any other costs he incurs in
connection with his use of his personal automobile for business
purposes.
-4-
5
2.07 Expenses. During the term of this Agreement, Executive shall be
entitled to prompt reimbursement by HFC 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 HFC 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 HFC's policies and procedures.
2.08. Attorneys' Fees. HFC shall pay, on behalf of Executive, the cost
of Executive's reasonable and substantiated attorneys' fees that he incurred in
connection with the negotiation of this Agreement, and other related agreements,
provided such fees do not exceed $7,500.
ARTICLE III
TERMINATION
3.01 Events of Termination. Executive's employment with HFC:
(a) May be terminated by mutual written agreement of HFC and
Executive.
(b) Shall terminate immediately upon the death of Executive.
(c) May be terminated upon written notice from HFC to Executive
for Cause, which shall mean the following:
(i) Material failure of Executive to (a) perform the
duties, requirements and responsibilities of his employment
as contemplated by this Agreement or as reasonably assigned
by HFC's Board of Directors, or (b) take reasonable direction
consistent with his position from the HFC's Board of
Directors; or
(ii) Material failure of Executive to comply with the
reasonable policies, regulations and directives of HFC 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 the
provisions of this Agreement; or
(iv) Any act or omission on the part of Executive
which is materially harmful to the reputation or business of
HFC, 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 HFC's employees; or
-5-
6
(v) 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.
Executive's termination for Cause shall be determined in good
faith by HFC's Board of Directors by a majority vote and/or its
designee.
In the event of termination pursuant to subparagraph
3.01(c)(iii), (iv) or (v), Executive's termination shall be
immediate upon the giving of written notice to Executive.
However, in the event of termination pursuant to subparagraph
3.01(c)(i) or (ii), HFC's Board of Directors will provide
Executive written notice (the "Cause Notice") of proposed
termination which provides (1) reasonable detail as to the cause
or causes asserted by HFC and upon which the Cause Notice is
based, and (2) notification of a sixty (60) day period of time
from receipt of such Cause Notice within which he shall have the
opportunity to cure the performance or conduct upon which the
Cause Notice is based, to the satisfaction of HFC's Board of
Directors. If after the completion of the designated cure period
HFC's Board of Directors reasonably determines that Executive has
failed to cure the performance or conduct, Executive will be
given written notice of his termination and Executive's
employment will terminate immediately upon the giving of such
notice to Executive.
(d) May be terminated upon Executive's inability to perform the
essential functions of his position due to physical or mental
disability, with or without reasonable accommodation, as
determined in the good faith judgment of the HFC's Board of
Directors, or as may otherwise be required by applicable law.
(e) Shall terminate at the end of the month during which
Executive reaches the normal retirement date established by HFC
for senior management employees of HFC, but in no event earlier
than the compulsory retirement age permitted under federal or
similar law for senior management employees.
(f) May be terminated by Executive for any reason on ninety (90)
days' written notice to HFC.
(g) May be terminated by HFC at any time, for any reason, upon
written notice to Executive.
(h) May be terminated by HFC upon written notice to Executive
upon a Change of Control, or may be terminated by Executive upon
written notice to HFC upon a Change of Control if, and only if,
such resignation is caused by the fact that Executive will not
become Chief Executive Officer of the entire corporate or
hospital/community center fitness management business of the new
controlling entity because the new controlling entity did not
place Executive in such position.
-6-
7
3.02 Compensation Upon Termination of Executive's Employment. In the
event that Executive's employment with HFC terminates the following provisions
shall govern as applicable:
(a) If termination occurs pursuant to subparagraph 3.01(a), (b),
(c), (d), (e), or (f), Executive's receipt of annual base salary
and fringe benefits (treatment of bonus compensation addressed
below in subparagraph 3.02(d)) shall terminate as of the date of
termination or as required by law, unless the parties agree in
writing otherwise. If termination occurs pursuant to subparagraph
3.01(d), Executive acknowledges and agrees that his receipt of
salary compensation between the date of disability and date of
termination shall be governed by HFC's employee benefit programs,
as may be amended from time to time, to the extent Executive is
eligible to participate in such programs.
(b) If termination occurs pursuant to subparagraph 3.01(g),
Executive's receipt of annual base salary and fringe benefits
(treatment of bonus compensation addressed below in subparagraph
3.02(d)) shall terminate as of the date of termination or as
required by law. However, Executive shall receive as separation
pay the equivalent of twelve (12) months of his then current
annual base salary. Any separation pay due to Executive under
this subparagraph 3.02(b) shall be payable to Executive, at the
sole discretion of HFC, either in a lump sum or in installments
in accordance with HFC's standard payroll practices. Executive
shall be required to execute a general, mutual release of any and
all claims in favor of HFC in exchange for his receipt of
separation pay under this subparagraph 3.02(b). Such release
agreement shall be prepared at the direction of HFC and shall be
approved by HFC and Executive.
(c) If termination occurs pursuant to subparagraph 3.01(h),
either by Executive or HFC, Executive's receipt of annual base
salary and fringe benefits (treatment of bonus compensation
addressed below in subparagraph 3.02(d)) shall terminate as of
the date of termination or as required by law, unless provided
otherwise below:
(i) If Executive's employment is terminated by HFC pursuant
to subparagraph 3.01(h) and such termination occurs within
six (6) months from Executive's commencement of employment
with HFC, Executive will be entitled to separation pay at his
then current annual base salary for twelve (12) months
following his date of termination.
(ii) If Executive's employment is terminated by HFC pursuant
to subparagraph 3.01(h) and such termination occurs sometime
after Executive has been employed by HFC for six (6) months
but sometime before Executive has been employed by HFC for
nine (9) months, Executive will be entitled to separation pay
at his then current annual base salary for eighteen (18)
months following his date of termination.
(iii) If Executive's employment is terminated by HFC pursuant
to subparagraph 3.01(h) and such termination occurs sometime
after Executive
-7-
8
has been employed by HFC for nine (9) months, Executive will
be entitled to separation pay at his then current annual
base salary for twenty-four (24) months following his date
of termination.
(iv) If Executive voluntarily resigns his employment with HFC
pursuant to subparagraph 3.01(h) because, and only because,
he will not become Chief Executive Officer of the entire
corporate or hospital/community center fitness management
business of the new controlling entity because the new
controlling entity did not place Executive in such position,
Executive will be entitled to separation pay at his then
current annual base salary for twelve (12) months following
his date of termination.
(v) Any separation pay due to Executive under this
subparagraph 3.02(c) shall be payable to Executive, at the
sole discretion of HFC, either in a lump sum or in
installments in accordance with HFC's standard payroll
practices. In addition, Executive shall be required to
execute a general, mutual release of any and all claims in
favor of HFC in exchange for his receipt of separation pay
under this subparagraph 3.02(c). Such release agreement shall
be prepared at the direction of HFC and shall be approved by
HFC and Executive.
(vi) Not withstanding the foregoing, Executive shall not be
entitled to receive any Change of Control Action, as defined
below, which would constitute an "excess parachute payment"
for purposes of Code Section 280G, or any successor
provision, and the regulations thereunder. In the event any
Change of Control Action payable to Executive would
constitute an "excess parachute payment," Executive shall
have the right to designate those Change of Control Actions
which would be reduced or eliminated so that Executive will
not receive a "excess parachute payment." For purposes of
this subparagraph 3.02(c)(vi), a "Change of Control Action"
shall mean any payment, benefit or transfer of property in
the nature of compensation paid to or for the benefit of
Executive under any arrangement which is considered
contingent on a Change of Control for purposes of Code
Section 280G, including, without limitation, any and all of
HFC's salary, bonus, incentive, restricted stock, stock
option, compensation or benefit plans, programs or other
arrangements, and shall include benefits payable under this
Agreement.
(d) If termination occurs pursuant to subparagraph 3.01(a), (b),
(d), (e), (g) or (h), Executive shall be entitled to receive a
prorated share of his bonus compensation for the calendar year in
which his employment terminates, unless the parties agree in
writing otherwise. Such proration shall be calculated from
January 1st of the year in which Executive's employment
terminates through the end of the most recently concluded HFC
fiscal quarter. For example, if Executive's employment terminates
pursuant to subparagraph 3.01(a), (b), (d), (e), (g) or (h) on
August 15, 2001, his prorated bonus compensation shall be based
on the period beginning January 1, 2001
-8-
9
and ending June 30, 2001, the close of HFC's most recent fiscal
quarter. In addition, such bonus compensation shall be calculated
based on prorated audited EBITDA earnings (or other then
applicable bonus compensation criteria), as reflected in HFC's
quarterly statement for the most recently concluded fiscal
quarter. For instance, if Executive's employment terminates
pursuant to subparagraph 3.01(a), (b), (d), (e), (g) or (h) on
August 15, 2001, and if HFC's audited EBITDA earnings through
June 30, 2001 equal $1,750,000, Executive shall be entitled to
bonus compensation totaling $69,000. If termination occurs
pursuant to subparagraph 3.01(c) or (f), Executive shall not be
entitled to receive any bonus compensation for the calendar year
in which his employment terminates.
(e) 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 HFC by Executive
for any amounts advanced, loaned or misappropriated in accordance
with applicable law.
(f) With the exception of subparagraph 3.02(c)(vi), the effect of
Executive's termination of employment on his stock options shall
be governed by the terms and conditions of the ISOA.
ARTICLE IV
PROTECTION OF TRADE SECRETS AND
CONFIDENTIAL BUSINESS DATA
4.01. Confidential Information. For the purposes of this Agreement,
"Confidential Information" means any information not generally known to the
public and proprietary to HFC and includes, without limitation, trade secrets,
inventions, and information pertaining to research, development, purchasing,
marketing, selling, accounting, licensing, business systems, business
techniques, site processes and manuals, customer lists, prospective customer
lists, price lists, fee schedules, business strategies and plans, information
pertaining to the benefits HFC provides to its customers, pending patentable
materials and/or designs, design documentation, documentation of meetings, tests
and/or test standards, employee compensation, or manuals whether in document,
electronic, computer or other form. For example, Confidential Information may be
contained in HFC'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 labeled or marked as being "confidential" or
"trade secret" shall be presumed to be Confidential Information. The definition
of "Confidential Information" 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 HFC concerning
HFC's business that is of commercial value to HFC, which information shall be
included in the definition of "Confidential Information" above, even though not
specifically listed in that definition. The definition of Confidential
Information and the provisions of this Article IV
-9-
10
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 HFC, (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 HFC 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
HFC or at any time after his termination of employment with HFC, regardless of
the reason for the Executive's termination, whether voluntary or involuntary.
Executive further promises and agrees that he will faithfully abide by any
rules, policies, practices or procedures existing or which may be established by
HFC 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 HFC and limiting safe or vault lock combinations or keys
to authorized personnel; and/or (d) checkout and return or other procedures
promulgated by HFC from time to time.
4.03 Return of Information/Property. Upon termination of the
employer-employee relationship, whether voluntary or involuntary, Executive will
return to HFC 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 HFC's place of business or employment with HFC, 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 HFC express,
written permission. Upon termination of employment, whether voluntary or
involuntary, Executive will deliver to HFC all Confidential Information in
recorded form in his possession, custody or control. Moreover, 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 HFC which is in Executive's
possession shall be returned to HFC at its 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 HFC only
with HFC's express, written permission.
4.04 Irreparable Harm. The parties acknowledge that HFC will suffer
irreparable harm if the Executive breaches Paragraphs 4.02 or 4.03, either
during or after his employment. Accordingly, HFC 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 HFC's right to
seek the issuance of such injunction. If HFC 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
-10-
11
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 8.07.
ARTICLE V
COVENANT NOT TO COMPETE
5.01 Non-Competition Agreement. During Executive's employment with HFC
and for a period of two (2) years (or such shorter period as provided for in
Paragraph 5.03) after his employment with HFC ends for whatever reason
(voluntary or involuntary), Executive shall not, anywhere within the 25-mile
radius of any HFC site as of the date of termination, directly or indirectly
own, consult for, be employed by, participate in, or provide services to any
business, person or entity engaged in the corporate, hospital, or community
management fitness and wellness industry if such business, person or entity is
engaged in competition with HFC's product lines and/or services that are or were
offered by HFC at any time during Executive's employment with HFC.
5.02 Non-Solicitation Agreement. During Executive's employment with
HFC and for a period of two (2) years (or such shorter period as provided for in
Paragraph 5.03) after his employment with HFC ends for whatever reason
(voluntary or involuntary), Executive shall not,
(a) solicit HFC's then current customers or potential customers
that HFC was soliciting as of the date of termination, on behalf
of himself or any other business, person or entity for the
purpose of selling, offering, providing or otherwise making
available products or services that are the same as or similar to
those products and services that were offered by HFC at any time
during Executive's employment with HFC;
(b) exploit or use contacts, developed or made during his
employment with HFC, for the purpose of soliciting HFC's then
current customers or potential customers that HFC was soliciting
as of the date of termination, on behalf of himself or any other
business, person or entity for purpose of selling, offering,
providing or otherwise making available products or services that
are the same as or similar to those products and services that
were offered by HFC at any time during Executive's employment
with HFC; or
(c) directly or indirectly, individually induce or attempt to
induce, any of HFC's then current employees or independent
contractors to terminate their employment, contractual or other
relationship with HFC, or otherwise interfere or attempt to
interfere with that existing employment or other relationship
with HFC for the purpose of inducing or attempting to induce such
individual to enter into an employment, contractual or other
relationship with any other business, person or entity or person
engaged in the corporate, hospital, or community management
fitness and wellness industry.
-11-
12
5.03 Duration of Restrictions. Notwithstanding Paragraphs 5.01 or 5.02
of this Agreement,
(a) in the event Executive's employment terminates pursuant to
subparagraph 3.01(g) or 3.01(h) of this Agreement, the
restrictions against competition contained in Paragraphs 5.01 and
5.02 shall be in effect during Executive's employment with HFC
and shall continue following termination for the period of time
equal to the number of months of separation pay received by
Executive, regardless of whether such separation pay is paid in a
lump sum or in installments. For example, if Executive is
entitled to twelve (12) months of separation pay pursuant to
subparagraph 3.02(b), the restrictions against competition
contained in Paragraphs 5.01 and 5.02 shall run for a period of
twelve (12) months following Executive's last day of employment
with HFC; and
(b) in the event Executive's employment terminates pursuant to
subparagraph 3.01(c)(i), 3.01(c)(ii), 3.01(c)(iii), or 3.01(f) of
this Agreement, the restrictions against competition contained in
Paragraphs 5.01 and 5.02 shall be in effect during Executive's
employment with HFC and shall continue for twelve (12) months
following Executive's last day of employment with HFC.
5.04 Non-Disparagement. During Executive's employment with HFC and at
all times thereafter, Executive shall not disparage or defame, or allow or cause
others to disparage or defame, HFC, its Board of Directors, directors, officers,
employees, customers, or vendors.
5.05 Irreparable Harm. The parties acknowledge that HFC will suffer
irreparable harm if Executive breaches Paragraph 5.01, 5.02 or 5.04.
Accordingly, HFC 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, 5.02 or 5.04 and
Executive hereby consents to HFC's right to seek the issuance of such
injunction. If HFC 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, 5.02 or 5.04 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 8.07.
5.06 Limit to Extent Enforceable. In the event that a court of
competent jurisdiction determines that any of the provisions of Paragraph 5.01,
5.02 or 5.04 are unreasonable, it may limit such provision to the extent it
deems reasonable, without declaring the provision of Paragraph 5.01, 5.02, or
5.04 invalid in its entirety. This provision shall not be construed as an
admission by HFC, but is only included to provide HFC with the maximum possible
protection for its business, Confidential Information, trade secrets and data,
consistent with the right of Executive to earn a livelihood subsequent to the
termination of his employment.
5.07 Survival of Provisions. The parties agree that the provisions in
this Article V shall survive termination of this Agreement and termination of
Executive's employment for any reason.
-12-
13
5.08 Disclosure After Termination. Executive hereby acknowledges and
agrees that, until the expiration of the provisions contained in Article V of
this Agreement, he shall provide a copy of this Article V to each and every
business, person and/or entity with whom he accepts employment or enters into
any other business endeavor.
ARTICLE VI
INVENTIONS
6.01 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
HFC's present or future sales, research, or other business activities, or
reasonably foreseeable business interests of HFC.
6.02 Disclosure. Executive shall promptly and fully disclose to HFC
and will hold in trust for HFC 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 HFC; or
(c) involves the use of any time, material, or facility of HFC.
6.03 Assignment of Ownership. Executive hereby assigns to HFC all of
Executive's right, title, and interest in and to all such inventions as
described in Paragraph 6.02 and, upon HFC's request, Executive shall execute,
verify, and deliver to HFC 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 HFC to
obtain the sole right, title, and benefit to all such inventions.
6.04 Excluded Inventions. It is further agreed, and Executive is
hereby so notified, that the above agreement to assign inventions to HFC does
not apply to any invention for which no equipment, supplies, facility, or
Confidential Information of HFC was used, which was developed entirely on
Executive's own time, and (a) which does not relate: (i) directly to the
business of HFC; or (ii) to HFC's actual or demonstrably anticipated research or
development; or (b) which does not result from any work performed by Executive
for HFC.
6.05 Specific Performance; Attorney Fees. Executive expressly
acknowledges and agrees that any violation of any terms of Paragraphs 6.02 or
6.03 may result in the issuance of a temporary restraining order and/or
injunction against Executive to effect specific performance of the terms of
Paragraphs 6.02 or 6.03. If HFC institutes any action against Executive, alone
or in conjunction with any third party or parties, to enforce any term or
provision of Paragraphs 6.02 or 6.03, 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 8.07.
-13-
14
ARTICLE VII
ARBITRATION
7.01 Agreement to Arbitrate. With the exception of HFC's right to seek
injunctive relief in connection with breaches by Executive of Paragraphs 4.02,
4.03, 5.01, 5.02, 5.04 and/or 6.02 or 6.03 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 American Arbitration Association ("AAA") under
the AAA's National Rules for the Resolution of Employment Disputes. 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 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 at least 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
MISCELLANEOUS
8.01 Governing Law. This Agreement shall be governed according to the
laws of the State of Minnesota.
8.02 Captions. The captions set forth in this Agreement are for
convenience only and shall not be considered as part of this Agreement or as in
any way limiting or amplifying the terms and conditions hereof.
8.03 No Conflicting Obligations. With the exception of Section 9 of
the Separation Agreement and Release and Section 2(d) of the Amendment to
Separation Agreement and Release between Executive and Starmark Northwest
Management, L.L.C., Executive represents and warrants to HFC that he is not
under, or bound to be under in the future, any obligation to any person, firm,
or corporation that is or would be inconsistent or in conflict with this
Agreement or would prevent, limit, or impair in any way the performance by him
of his obligations hereunder. Specifically, but without limiting the generality
of the foregoing, and with the exception of Section 9 of the Separation
Agreement and Section 2(d) of the Amendment to Separation Agreement and Release
between Executive and Starmark Northwest Management, L.L.C., Executive warrants
and represents to HFC that he is not currently bound and will not be bound in
the future by any confidentiality agreements and/or restrictive covenants that
may and/or will restrict his ability to
-14-
15
perform his duties hereunder. Moreover, Executive agrees that he will not enter
into any confidentiality agreements and/or restrictive covenants during his
employment with HFC that may or will restrict his ability to perform his duties
hereunder, with the exception of any confidentially agreements and/or
restrictive covenants entered into by and between Executive and HFC.
8.04 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 HFC. This Agreement is binding on any successors or assigns
of HFC.
8.05 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.
8.06 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 HFC by notice to each member of HFC's Board of Directors,
and to Xxxxxxxxxx & Xxxxx, P.A., 1100 International Centre,
000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000,
Attention: Xxxx Xxxxxxxx
(b) To Executive at his home address as it then appears on the
records of HFC, it being the duty of the Executive to keep HFC
informed of his current home address at all times.
The date on which notice to HFC 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 HFC or any messenger or delivery service.
8.07 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 Executive is
terminated pursuant to Paragraph 3.01(c) and determines to challenge HFC's
determination of Cause, HFC 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."
8.08 Term. This Agreement shall be effective from November 30, 2000
and shall continue until terminated in accordance with the provisions set forth
in this Agreement.
-15-
16
8.09 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.
8.10 Counterparts. More than one counterpart of this Agreement may be
executed by the parties hereto, and each fully executed counterpart shall be
deemed an original.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of
the date written above.
HEALTH FITNESS CORPORATION
By /s/ Xxxxx Xxxxxxxx
----------------------------------------------
Xxxxx Xxxxxxxx
Its: Chairman of the Board of Directors
EXECUTIVE
/s/ Xxxxx Xxxxx
-------------------------------------------------
Xxxxx Xxxxx
