SEVERANCE AGREEMENT
This Agreement, made and entered into by and between ENStar Inc., a
Minnesota corporation (as further defined herein, the "Company") and Xxxxxxx X.
Xxxxxxx (the "Employee"), effective this 5th day of April 1999.
WHEREAS, this Agreement is intended to specify the financial arrangements
that the Company will provide to the Employee upon the Employee's separation
from employment with the Company under any of the circumstances described herein
and in certain circumstances following a Change in Control (as defined herein);
and
WHEREAS, this Agreement is entered into by the Company in the belief that
it is in the best interest of the Company to provide stable conditions of
employment for the Employee notwithstanding the possibility, threat, or
occurrence of certain types of changes in control, thereby enhancing the
Company's ability to attract and retain highly qualified people;
NOW, THEREFORE, in consideration of the mutual covenants, promises,
payments, and undertakings of the parties hereto, the parties agree as follows:
1. EFFECT OF AGREEMENT; TERM. The Employee shall be employed on an
at-will basis. This Agreement is not, and shall not be construed as, an
employment contract affecting in any way the duration of the Employee's
employment or any terms and conditions thereof except those set forth herein.
Except as set forth herein, the Employee or the Company may terminate their
employment relationship at any time, for any reason, or for no reason.
This Agreement will commence on the date hereof and shall continue in
effect until the second anniversary of the date hereof; provided, however, that
if a Change in Control occurs this Agreement shall continue in effect for a
period of twenty-four months following the Change in Control if such period
extends beyond the second anniversary of the date of this agreement; provided,
further, that if the Employee becomes entitled to payments or benefits in
accordance with the terms of this Agreement (or assets a claim for such
payments) during the term of this Agreement, this Agreement will thereafter
survive indefinitely to ensure that the Employee receives all payments and
benefits to which the Employee is entitled pursuant to the terms hereof.
2. TERMINATION OF EMPLOYMENT.
(a) During the term of this Agreement, the Company shall not
terminate the Employee within twenty-four months following a Change in
Control from employment with the Company except as provided in this section 2,
or as a result of the Employee's Disability (as defined in section 3(c) hereof)
or the Employee's death.
(b) During the term of this Agreement, the Company shall have the
right to terminate the Employee from employment with the Company at any time
during the twenty-four month period following a Change in Control for Cause
(as defined in section 3(b) hereof), by written notice to the Employee,
specifying the particulars of the conduct of the Employee forming the basis
for such termination.
(c) During the term of this Agreement, the Company shall have the
right to terminate the Employee's employment without Cause (as defined in
section 3(b) hereof), at any time, during the twenty-four month period
following a Change in Control and in such event, Employee shall be entitled to
receive the benefits provided in Section 4 hereof.
3. DEFINITIONS.
(a) A "Change in Control" shall mean any of the following:
(i) A sale of all or substantially all of the assets of the
Company.
(ii) The acquisition of more than 50% of the Common Stock of
the Company (with all classes or series thereof treated as a single
class) by any person (except a Permitted Shareholder as hereinafter
defined) or group of persons acting in concert. A "Permitted
Shareholder" means a holder, as of the date of this Agreement, of more
than 20% of the Company's Common Stock then outstanding.
(iii) A reorganization of the Company wherein the holders of
Common Stock of the Company receive stock in another company, a merger
of the Company with another company wherein there is a more than 50%
change in the ownership of the Common Stock of the Company as a result
of such merger, or any other transaction in which the Company (other
than as the parent corporation) is consolidated for federal income tax
purposes or is eligible to be consolidated for federal income tax
purposes with another corporation.
(iv) In the event that the Common Stock of the Company is
traded on an established securities market: a public announcement that
any person, other than a Permitted Shareholder, has acquired or has
the right to acquire beneficial ownership of more than 50% of the then
outstanding Common Stock of the Company (for this purpose the terms
"person" and "beneficial ownership" shall have the meanings provided
in Section 13(d) of the Securities and Exchange Act of 1934 or related
rules promulgated by the Securities and Exchange Commission) or the
commencement of or public announcement of an intention to make a
tender offer or exchange offer for more than 50% of the then
outstanding Common Stock of the Company by a person other than a
Permitted Shareholder.
(v) The Board of Directors of the Company in its sole and
absolute discretion, determines that there has been a sufficient
change in the share ownership of the Company or the Company to
constitute a change of effective ownership or control of the Company
or the Company.
(b) "Cause" shall mean:
(i) Repeated willful and deliberate neglect by the Employee
of any of his material duties or his repeated willful and deliberate
failures or omissions to carry out lawful and reasonable orders which
are not cured within a reasonable period after the Employee's receipt
of written notice thereof from the Company;
(ii) Any act or acts of personal dishonesty by the Employee
intended to result in the personal enrichment of the Employee at the
expense of the Company;
(iii) Any willful and deliberate misconduct that is materially
and demonstrably injurious to the Company; or
(iv) Any criminal indictment, presentment, charge or conviction
of the Employee for a felony, whether or not the Company is the victim
of such offense.
(c) "Disability" shall mean any physical or mental condition, which
causes the Employee to fail to render services to the Company for a period of
ninety (90) days during any one hundred eighty (180) day period. The existence
or nonexistence of the Employee's Disability will be determined in good faith by
the Board of Directors after notice in writing given to the Employee at least
thirty (30) days prior to such determination. During such thirty (30) day
period, the Employee shall be permitted to make a presentation to the Board of
Directors for its consideration.
(d) "Company" shall mean the Company and any successor to its
business and/or assets, including any successor which is required to execute
and deliver the Agreement provided for in section 7(a) or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation
of law.
4. BENEFITS UPON TERMINATION UNDER SECTION 2(C).
(a) Following a Change in Control. Upon the termination of the
employment of the Employee pursuant to section 2(c) hereof and within
twenty-four months following a Change in Control, and subject to the other
terms and conditions of this Agreement, the Employee shall be entitled to the
benefits, to be funded from the general assets of the Company, provided below:
(i) A lump sum cash payment, to be paid within 30 days
following your date of termination of employment equal to
twenty-four months of your total compensation (consisting of base
salary and target bonus) as in effect immediately prior to the
date of termination or, if greater, immediately prior to the Change
in Control.
(ii) For the twenty-four month period after the date of
termination of employment, the Company will arrange to provide the
Employee and the Employee's dependents (if applicable) with welfare
benefits (including, without limitation, medical insurance coverage),
perquisites and other employee benefits that provide substantially
similar benefits, in terms of aggregate monetary value, to the
Employee and the Employee's dependents (if applicable) at
substantially similar costs to the Employee as the welfare benefits,
perquisites and other employee benefits in effect immediately prior to
the Change in Control (or as in effect following the Change in
Control, if greater) the Employee's rights under the Consolidated
Omnibus Budget Reconciliation Act of 1985 shall commence as of the end
of the twenty-four month period covered by the paragraph.
(b) The Employee shall not be required to mitigate the amount of any
payment provided for in this section 4 by seeking other employment or otherwise.
(c) In the event that any payment or benefit received or to be
received by Employee in connection with a change in control of the Company or
termination of Employee's employment (whether payable pursuant to the terms of
this Agreement or any other plan, contract, agreement or arrangement with the
Company with any person whose actions result in a change in control of the
Company or with any person constituting a member of an "affiliated group" as
defined in Section 280G(d)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), with the Company or with any person whose actions result in a
change in control of the Company) (collectively, the "Total Payments") would
not be deductible (in whole or in part) by the Company or such other person
making such payment or providing such benefit solely as a result of Section
280G of the Code, the amount payable to Employee pursuant to this Agreement
shall be reduced until no portion of the Total Payments is not deductible
solely as a result of Section 280G of the Code or such amount payable to
Employee pursuant to this Agreement is reduced to zero. For purposes of this
limitation, (i) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the Company does not
constitute a "parachute payment" within the meaning of Section 280G(b)(2) of
the Code (such as payments payable pursuant to the Company's standard of
general severance policies); (ii) the payment pursuant to this Agreement shall
be reduced only to the extent necessary so that the Total Payments (other than
those referred to in the immediately preceding clause (i)) in their entirety
constitute reasonable compensation within the meaning of Section 280G(b)(4)(B)
of the Code, in the opinion of the tax counsel referred to in the immediately
preceding clause (i); and (iii) the value of any other non-cash benefit or of
any deferred cash payment included in the Total Payments shall be determined by
the independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. In case of uncertainty as to whether all or
some portion of a payment is or is not payable to Employee under this
Agreement, the Company shall initially make the payment to the Employee, and
Employee agrees to refund to the Company any amounts ultimately determined
not to have been payable under the terms hereof.
5. NONCOMPETITION COVENANT.
(a) Agreement Not to Compete. The Employee agrees that, during the
Employee's term of employment by the Company and for a period of six months
after termination of employment for any reason (including, without limitation,
voluntary termination by the Employee of the Employee's employment), the
Employee shall not directly engage in competition with the Company in any
manner or capacity (e.g., as an advisor, principal, agent, partner, officer,
employee, or otherwise) in any phase of the business that the Company is
currently conducting, including the design, development, manufacture or
selling of devices or components related to the products being sold by the
Company at the time of the Employee's termination. The Employee agrees that
entering into this Agreement and the opportunity to receive the benefits set
forth herein is full consideration for the terms of this section 5.
(b) Geographic Extent of Covenant. The obligations of the Employee
under this section 5 shall apply to any domestic or foreign city in which the
Company (i) has engaged in business during the Employee's term of employment
by the Company through production, promotional, sales or marketing activity, or
otherwise or (ii) has otherwise established its goodwill, business reputation,
or any customer or supplier relations.
(c) Limitation on Covenant. Ownership by the Employee, as a passive
investment, of less than five percent (5%) of the outstanding shares of capital
stock of any corporation listed on a national securities exchange or publicly
traded in the over-the-counter market, or serving as a member of the board of
directors of a company, shall not constitute a breach of this section 5.
(d) Indirect Competition. The Employee further agrees that, during
the term of his employment by the Company and the six-month period thereafter
specified in section 5(a) above, the Employee will not, directly, or indirectly,
assist or encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this section 6,
if such activity were carried out by the Employee, either directly or
indirectly; and in particular the Employee agrees that the Employee will not,
directly or indirectly, induce any employee of the Company to carry out,
directly or indirectly, any such activity.
(e) Other Employees. The Employee further agrees that, both during
the term of the Employee's employment by the Company and for a period of
six-months following termination of the Employee's employment, the Employee will
not attempt to persuade officers or employees of the Company to leave the employ
of the Company.
(f) Company Remedies. The Employee acknowledges that the remedy at
law for any breach of the foregoing covenants of this section 5 will be
inadequate, and that the Company shall be entitled, in addition to any remedy at
law, to preliminary and permanent injunctive relief.
6. CONFIDENTIAL INFORMATION. Except as permitted or directed by the
Company's Board of Directors, during the Employee's employment by the Company
or at any time thereafter the Employee shall not divulge, furnish or make
accessible to anyone or use in any way (other than in the ordinary course of the
business of the Company) any confidential or secret knowledge or information of
the Company that the Employee has acquired or become acquainted with or will
acquire or become acquainted with prior to the termination of the Employee's
employment with the Company (including employment by the Company or any
affiliates of the Company prior to the date of this Agreement), whether
developed by the Employee or by others, concerning any trade secrets,
confidential or secret designs, processes, formulae, plans, devices or material
(whether or not patented or patentable) directly or indirectly useful in any
aspect of the business of the Company, any customer or supplier lists of the
Company, or any other confidential information or secret aspects of the
business of the Company. The Employee acknowledges that the above-described
knowledge or information constitutes a unique and valuable asset of the
Company and represents a substantial investment of time and expense by the
Company and its predecessors, and that any disclosure or other use of such
knowledge or information other than for the sole benefit of the Company
would be wrongful and would cause irreparable harm to the Company. Both
during and after the term of this Agreement, the Employee will refrain from
any acts or omissions that would reduce the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information that is now
published or that subsequently becomes generally publicly known in the
form in which it was obtained from the Company, other than as a direct or
indirect result of the breach of this Agreement by the Employee.
7. SUCCESSORS AND BINDING AGREEMENT.
(a) This Agreement shall inure to the benefit of an be binding upon
the Company and its successors. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or of the assets of the Company to
expressly assume and agree to perform this Agreement.
(b) This Agreement is personal to the Employee, and the Employee
may not assign or transfer any part of his rights or duties hereunder, or any
compensation due to him hereunder, to any other person. Notwithstanding
the foregoing, this Agreement shall inure to the benefit of, and be enforceable
by, the Employee's personal or legal representatives, executors, administrators,
heirs, distributees, devisees, and legatees.
8. LIMITATION OF DAMAGES. If for any reason the Employee believes the
severance provisions of this Agreement have not been properly adhered to by the
Company, and if it is determined that the Company has not, in fact, properly
adhered to the severance provisions of this Agreement, the sole and exclusive
remedy to which the Employee is entitled is the severance payment to which the
Employee is entitled under the provisions of this Agreement.
9. MODIFICATION; WAIVER. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing signed by the Employee and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
10. NOTICE. All notices, requests, demands, and all other communications
required or permitted by either party to the other party by this Agreement
(including, without limitation, any notice of termination of employment) shall
be in writing and shall be deemed to have been duly given when delivered
personally or received by certified or registered mail, return receipt
requested, postage prepaid, at the address of the other party as first written
above (directed to the attention of the Board of Directors in the case of the
Company). Either party hereto may change its address for purposes of this
section by giving fifteen (15) days prior written notice to the other party
hereto.
11. SEVERABILITY. If any term or provision of this Agreement or the
application hereof to any person or circumstances shall to any extent be
determined to be invalid or unenforceable, the remainder of this Agreement or
the application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable shall not be
affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
12. GOVERNING LAW. This Agreement has been executed and delivered in the
State of Minnesota and shall in all respects be governed by, and construed and
enforced in accordance with, the laws of the State of Minnesota, including all
matters of construction, validity, and performance.
13. EFFECT OF AGREEMENT; ENTIRE AGREEMENT. The Company and the Employee
understand and agree that this Agreement is intended to reflect their agreement
only with respect to the subject matter hereof and is not intended to create any
obligation on the part of either party to continue employment. This Agreement
supersedes any and all other oral or written agreements or policies made
relating to the subject matter hereof; provided that this Agreement shall not
supersede or limit in any way the Employee's rights under any benefit plan or
program in accordance with its terms.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement by their signatures below.
ENStar Inc.
By /s/ Xxxxx X. Xxxxx
--------------------------
Xxxxx X. Xxxxx
Executive Vice President
By /s/ Xxxxxxx X. Xxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxx
Employee
