Exhibit 10.26
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of December 16, 2008
(the "Effective Date), is made and entered into by and between Clearfield, Inc.,
a Minnesota corporation (hereinafter referred to as the "Company") and Xxxxx X.
Xxxxxxxx (the "Executive").
WHEREAS, the Company desires to employ the Executive and the Executive
desires to accept employment with the Company, upon the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. Employment and Employment Period
The Company agrees to employ the Executive and the Executive agrees to
accept such employment upon the terms and conditions set forth herein. Subject
to the provisions for earlier termination hereinafter provided, the Executive's
employment hereunder shall be for a term (the "Employment Period") commencing on
the Effective Date and ending on the third anniversary of the Effective Date
(the "Initial Termination Date"); provided, however, that this Agreement shall
be automatically extended for one additional year on the Initial Termination
Date and on each subsequent anniversary of the Initial Termination Date unless
either the Executive or the Company elects not to so extend the term of the
Agreement by notifying the other party, in writing, of such election not less
than sixty (60) days prior to the last day of the term then in effect.
2. Terms of Employment
(a) Position and Duties.
(i) During the Employment Period, the Executive shall serve
as Chief Executive Officer and President and shall perform such employment
duties as are usual and customary for such positions. During the Employment
Period, the Executive shall be a member of the Executive Management Committee of
the Company, and the Executive shall report directly to the Board of Directors
of the Company (the "Board") or its designee. The Executive Management Committee
shall, as a group, review and consider all major business policies, strategies
and initiatives of the Company and its affiliates. The Executive shall be
officed at the Company's main headquarters offices in Plymouth, Minnesota;
provided, however, that the Executive understands that travel will be a required
component of the position. At the Company's request, the Executive shall serve
the Company and/or its subsidiaries and affiliates in other positions and
capacities in addition to the foregoing. In the event that the Executive, during
the Employment Period, serves in any one or more of such additional capacities,
the Executive's compensation may (or may not) be increased beyond that specified
in Section 2(b) of this Agreement, in the Company's sole discretion. In
addition, in the event the Executive's service in one or more of such additional
capacities is subsequently terminated, the Executive's compensation, as
specified in Section 2(b) of this Agreement, shall not be diminished or reduced
in any manner as a result of such termination for so long as the Executive
otherwise remains employed under the terms of this Agreement.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote substantially all of her business time, energy, skills and best
efforts to the performance of her duties hereunder in a manner that will
faithfully and diligently further the business and interests of the Company.
Notwithstanding the foregoing, during the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on civic, charitable
or other boards or committees; provided, however, that the Executive will
consult with the Chairman of the Board prior to accepting a position on the
board of any publicly traded company; (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions; or (C) manage her personal
investments, so long as such activities do not materially interfere with the
performance of the Executive's responsibilities as an executive officer of the
Company.
(iii) The Executive agrees that she will not take personal
advantage of any business opportunity that arises during her employment by the
Company and which may be of benefit to the Company unless all material facts
regarding such opportunity are timely reported by the Executive to the Board for
consideration by the Company and the disinterested members of the Board
determine to reject the opportunity and to approve the Executive's participation
therein.
(b) Compensation, Benefits, Equity Grants.
(i) Base Salary. During the Employment Period, the Executive
shall receive a base salary of $220,000 per annum (the "Base Salary"), as the
same may be increased thereafter (or thereafter decreased, but not below the
initial Base Salary) pursuant to the Company's normal practices for its
executives. The Base Salary shall be paid at such intervals as the Company
customarily pays executive salaries. During the Employment Period, the Base
Salary shall be reviewed at least annually for possible increase (or decrease,
but not below the initial Base Salary), as determined by the Company's
compensation committee, in its sole discretion. Any increase in Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. The term "Base Salary" as utilized in this Agreement shall refer
to Base Salary as so adjusted.
(ii) Annual Bonus. In addition to the Base Salary, the
Executive shall be eligible to earn, for each fiscal year of the Company ending
during the Employment Period, an annual cash performance bonus (an "Annual
Bonus"). The amount of the Annual Bonus and the target performance goals
applicable to the Annual Bonus shall be determined in accordance with the terms
and conditions of said bonus plan as in effect from time to time; provided that
Executive's target for each Annual Bonus hereunder shall be 60% of Base Salary
for that year, and her maximum Annual Bonus shall be 150% of Base Salary for
that year. The terms and conditions of any such bonus plan shall be determined
by the Company's compensation committee of the Board in its sole discretion.
(iii) Sign-On Bonus. The Executive shall receive a sign-on
bonus in the amount of $2,000 within fifteen (15) days of the Effective Date as
additional consideration for the Executive's agreement to the terms and
conditions herein and her execution of this Agreement.
(iv) Welfare Benefit Plans. During the Employment Period,
the Executive and the Executive's eligible family members shall be eligible to
participate in the welfare benefit plans, practices, policies and programs
(including, if applicable, medical, dental, disability, employee life, group
life and accidental death insurance plans and programs) maintained by the
Company for its senior executives.
(v) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable business
expenses incurred by the Executive in accordance with the policies, practices
and procedures of the Company provided to senior executives of the Company.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to receive such fringe benefits and perquisites as
are provided by the Company to its senior executives from time to time, in
accordance with the policies, practices and procedures of the Company.
(vii) Vacation. During the Employment Period, the Executive
shall be entitled to receive paid vacation in accordance with the plans,
policies, programs and practices of the Company applicable to its senior
executives.
3. Termination of Employment
(a) The Executive's employment shall continue from the Effective Date
until it is terminated by the Company or the Executive in accordance with the
terms of this Agreement.
(b) Death. The Executive's employment will terminate automatically upon
the Executive's death.
(c) Disability. To the extent consistent with federal and state laws,
Executive's employment may be terminated if Executive suffers a Disability. For
purposes of this Agreement, "Disability" means a physical or mental illness
which renders Executive unable to perform her essential duties for ninety (90)
consecutive days or a total of one hundred and eighty (180) days in any twelve
(12) month period with or without reasonable accommodations, or unable to
perform those duties in a manner that would not endanger her health or safety or
the health or safety of others even with reasonable accommodations. The
existence of a Disability shall be determined through the opinion (to a
reasonable medical certainty) of an independent physician selected by the
Company or its insurers and reasonably acceptable to the Executive or the
Executive's legal representative. The Company is not, however, required to make
unreasonable accommodations for Executive or accommodations that would create an
undue hardship for the Company.
(d) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause or without Cause. For the purposes of this
Agreement, "Cause" shall mean the occurrence of any one or more of the following
events:
(i) The Executive's willful failure to perform or gross
negligence in performing her duties owed to the Company (other than such failure
resulting from the Executive's Disability or any such actual failure after her
issuance of a Notice of Termination for Good Reason), which continues after
thirty (30) days following a written notice delivered to the Executive by the
Board, which notice specifies such willful failure or gross negligence;
(ii) The Executive's commission of an act of fraud or
dishonesty in the performance of her duties;
(iii) The Executive's conviction of, or entry by the
Executive of a guilty or no contest plea to, any felony or a misdemeanor
involving moral turpitude;
(iv) Any material breach by the Executive of any fiduciary
duty or duty of loyalty owed to the Company; or
(v) The Executive's material breach of any of the provisions
of this Agreement which is not cured within thirty (30) days following written
notice thereof from the Company.
(e) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason or by the Executive without Good Reason. For purposes
of this Agreement, "Good Reason" shall mean the occurrence of any one or more of
the following events without the Executive's prior written consent, provided
that the Executive terminates her employment within one hundred and eighty (180)
days following the lapse of the Company's cure period described below as to one
or more of such events and unless the Company fully corrects the circumstances
constituting Good Reason (provided such circumstances are capable of correction)
prior to the Date of Termination:
(i) The Company's reduction of the Executive's annual base
salary below the initial Base Salary or reduction in the Executive's target
annual bonus;
(ii) The Company's material change of the Executive's duties
in a manner inconsistent with the Executive's position, authority, duties or
responsibilities as contemplated by Section 2(a) or other action by the Company
which materially diminishes such position, authority, duties or
responsibilities, excluding for this purpose isolated, insubstantial or
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof from Executive;
(iii) The relocation of the Company's offices at which
Executive is principally employed to a location more than 50 miles from such
offices;
(iv) The failure of a successor to the Company to (A) assume
and agree to perform the obligations of the Company hereunder, or (B) replace
this Agreement with an employment contract of substantially similar terms
acceptable to the Executive and no less favorable than those terms provided to
an acquiring Company's executive officers; or
(v) The Company's material breach of its obligations under
the Agreement.
Notwithstanding any other provision of this Section 3(e), the occurrence
of any event described in Section 3(e)(i) or (v) shall constitute Good Reason
only if (A) the Executive provides written notice to the Company of the
occurrence of such event within ninety (90) days of the initial occurrence of
such event, and (B) the Company fails to remedy the event described in the
Executive's written notice within thirty (30) days of the Company's receipt of
such notice.
(f) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(c) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, and (iii) specifies
the Date of Termination (which date shall be not less than thirty (30) days
after the giving of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
4. Obligations of the Company Upon Termination
(a) Without Cause, For Good Reason or The Company's Non-Renewal.
If, during the Employment Period, the Company shall terminate the Executive's
employment without Cause, the Executive shall terminate her employment for Good
Reason, or the Company elects not to extend the term of this Agreement in
accordance with Section 1, then the Executive will receive those payments and
benefits set forth below. The timing of the payments hereunder is subject to
Section 12(e) hereof:
(i) The Executive shall be paid, in two lump sum payments
(A) the Executive's earned but unpaid Base Salary and accrued but unpaid
vacation pay through the Date of Termination, and any Annual Bonus required to
be paid to the Executive pursuant to Section 2(b)(ii) above for any fiscal year
of the Company that ends on or before the Date of Termination to the extent not
previously paid (the "Accrued Obligations"), and (B) an amount (the "Severance
Amount") equal to two (2) times the sum of (1) the Base Salary in effect on the
Date of Termination, plus (2) the average Annual Bonus received by the Executive
for the three (3) complete fiscal years as the Chief Executive Officer (or such
lesser number of years as the Executive has been employed as the Chief Executive
Officer) of the Company immediately prior to the Date of Termination;
(ii) At the time annual bonuses are paid to the Company's
other senior executives for the fiscal year of the Company in which the Date of
Termination occurs, the Executive shall be paid an Annual Bonus in an amount
equal to the product of (A) the amount of the Annual Bonus to which the
Executive would have been entitled if the Executive's employment had not been
terminated, and (B) a fraction, the numerator of which is the number of days in
such fiscal year through the Date of Termination and the denominator of which is
the total number of days in such fiscal year (a "Pro-Rated Annual Bonus");
(iii) If Executive (or any of Executive's qualified
beneficiaries) makes a timely election to continue to participate in the
Company's group health plans (medical, dental, and vision) pursuant to 29 U.S.C.
xx.xx. 1161-1169 ("COBRA"), the Company shall pay the premium for such coverage
(which premium payment shall be taxable to Executive if the Company's group
health plans are self-insured) starting on the Date of Termination and ending on
the earlier of (A) the date that is one (1) year after the Date of Termination,
or (B) the date on which Executive no longer is eligible to continue to
participate under COBRA. For purposes of the foregoing, the usual limitations of
COBRA shall apply and the Company's payment of the COBRA premium(s) shall not
extend the continuation period, which begins on the Date of Termination;
(iv) Any unvested stock options shall become immediately
vested in full; and
(v) To the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any vested benefits and
other amounts or benefits required to be paid or provided or which the Executive
is eligible to receive as of the Date of Termination under any plan, contract or
agreement of the Company and its affiliates (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits") to which the Executive
is a party.
Notwithstanding anything to the contrary in this Section 4, it shall be a
condition to the Executive's right to receive the amounts provided for above
that the Executive execute, deliver to the Company and not revoke a release of
claims in substantially the form attached hereto as Exhibit A.
(b) For Cause or Without Good Reason. If the Executive's employment
shall be terminated by the Company for Cause or by the Executive without Good
Reason during the Employment Period, the Company shall have no further
obligations to the Executive under this Agreement other than pursuant to
Sections 6 and 7 hereof, and the obligation to pay to the Executive the Accrued
Obligations when due under Minnesota law and to provide the Other Benefits in
accordance with the provisions of the applicable plan, program, agreement and/or
law.
(c) Death or Disability. If the Executive's employment is terminated
by reason of the Executive's Death or Disability during the Employment Period:
(i) The Accrued Obligations shall be paid to the Executive's
estate or beneficiaries or to the Executive, as applicable, in a lump-sum cash
payment when due under Minnesota law;
(ii) 100% of the Executive's then current annual Base
Salary, as in effect on the Date of Termination, shall be paid to the
Executive's estate or beneficiaries or the Executive, as applicable, in a
lump-sum cash payment within twenty (20) days following the Date of Termination;
(iii) The Pro-Rated Annual Bonus shall be paid to the
Executive's estate or beneficiaries or to the Executive, as applicable, at the
time when annual bonuses are paid to the Company's other senior executives for
the fiscal year of the Company in which the Date of Termination occurs;
(iv) If any of the Executive's qualified beneficiaries makes
a timely election to continue to participate in the Company's group health plans
pursuant to COBRA, the Company shall pay the premium for such coverage (which
premium payment shall be taxable to Executive if the Company's group health
plans are self-insured) starting on the Date of Termination and ending on the
earlier of (A) the date that is one (1) year after the Date of Termination, or
(B) the date on which the Executive's qualified beneficiary no longer is
eligible to continue to participate under COBRA. For purposes of the foregoing,
the usual limitations of COBRA shall apply and the Company's payment of the
COBRA premium(s) shall not extend the continuation period, which begins on the
Date of Termination; and
(v) The Other Benefits shall be paid or provided to the
Executive's estate or beneficiaries or to the Executive, as applicable, on a
timely basis.
Notwithstanding anything to the contrary in this Section 4(c), in the
event the Executive's employment is terminated by reason of Disability, the
amount described in Section 4(c)(ii) shall be paid to Executive no later than
March 15th of the calendar year immediately following the calendar year in which
the Executive suffers such Disability.
5. Termination Upon a Change in Control
If a Change in Control (as defined in the Company's 2007 Stock
Compensation Plan as in effect on December 16, 2008, but excluding from such
definition Section 8(b)(ii) thereof)) occurs during the Employment Period, the
Company shall pay to the Executive a lump sum payment in the amount of the
Executive's Base Salary in effect on the date of the Change in Control. If the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason or without Good Reason within one (1) year after the
effective date of the Change in Control (the "CIC Anniversary"), then the
Executive shall also be entitled to receive the payments and benefits provided
in Section 4(a), subject to the terms and conditions thereof. For the purposes
of this Section, the calculation of the Executive's average Annual Bonus will be
the greater of (a) the average Annual Bonus received by the Executive for the
three (3) complete fiscal years as the Chief Executive Officer (or such lesser
number of years as the Executive has been employed as the Chief Executive
Officer) of the Company immediately prior to the date of the Change in Control,
and (b) the amount representing the Executive's Base Salary in effect on the
date of the Change in Control. The timing of the foregoing payments is subject
to Section 12(e) hereof. In addition, in the event of such a termination of the
Executive's employment, all outstanding stock options, restricted stock and
other equity awards granted to the Executive under any of the Company's equity
plans (or awards substituted therefor covering the securities of a successor
company) shall become immediately vested and exercisable in full.
6. Full and Final Settlement
In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as expressly
provided, such amounts shall not be reduced whether or not the Executive obtains
other employment. If any party to this Agreement institutes any action, suit,
counterclaim, appeal, arbitration or mediation for any relief against another
party, declaratory or otherwise (collectively an "Action"), to enforce the terms
of this Agreement or to declare rights hereunder, then the Prevailing Party in
such Action shall be entitled to recover from the other party, in addition to
all applicable remedies, all costs and expenses of the Action, including
reasonable attorneys' fees and costs (at the Prevailing Party's attorneys'
then-prevailing rates) incurred in bringing and prosecuting or defending such
Action and/or enforcing any judgment, order, ruling or award (collectively, a
"Decision") granted therein, all of which shall be deemed to have accrued on the
commencement of such Action and shall be paid whether or not such Action is
prosecuted to a Decision. Any Decision entered in such Action shall contain a
specific provision providing for the recovery of attorneys' fees and costs
incurred in enforcing such Decision. A court or arbitrator shall fix the amount
of reasonable attorneys' fees and costs upon the request of either party. Any
judgment or order entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit,
including reasonable attorneys' fees and expert fees and costs incurred in
enforcing, perfecting and executing such judgment. For the purposes of this
Section, costs shall include, without limitation, in addition to costs incurred
in prosecution or defense of the underlying action, reasonable attorneys' fees,
costs, expenses and expert fees and costs incurred in the following: (a)
post-judgment motions and collection actions; (b) contempt proceedings; (c)
garnishment, levy, debtor and third party examinations; (d) discovery; (e)
bankruptcy litigation; and (f) appeals of any order or judgment. "Prevailing
Party" within the meaning of this Section includes, without limitation, a party
who agrees to dismiss an Action (excluding an Action instituted in contravention
of the requirements of Paragraph 12(b) below) in consideration for the other
party's payment of the amounts allegedly due or performance of the covenants
allegedly breached, or obtains substantially the relief sought by such party.
7. Certain Additional Payments by the Company
Anything in this Agreement to the contrary notwithstanding and except as
set forth herein, in the event it shall be determined that any payment to the
Executive hereunder would be subject to an excise tax, then the Executive may be
entitled to receive an additional payment under the Company's Excise Tax
Gross-Up Payment Plan provided to senior executives of the Company.
8. Non-Competition, Non-Solicitation and Protection of Confidential
Information
(a) Non-Competition and Non-Solicitation. The Executive acknowledges
that: (i) the business in which the Company competes is highly competitive; (ii)
as a key executive, she will participate in servicing current clients and
vendors and/or soliciting prospective clients and vendors, through which the
Executive will obtain knowledge of the "know-how" and business practices of the
Company, in which matters the Company has a substantial proprietary interest;
(iii) her employment requires the performance of services that are special,
unique, and extraordinary, and her position with the Company places her in a
position of confidence and trust with the Company's clients, vendors and
employees; and (iv) her rendering of services to the Company's clients and
vendors necessarily will require the disclosure to the Executive of confidential
information (as defined in Section 8(b) hereof) of the Company. In the course of
her employment, the Executive will develop personal relationships with the
Company's clients and vendors and knowledge of those clients' and vendors'
affairs and requirements, and the Company's relationship with its clients and
vendors will therefore be placed in the Executive's hands in confidence and
trust. Thus, the Executive agrees that it is a legitimate interest of the
Company, and reasonable and necessary for the protection of the Company's
confidential information, goodwill and business, that the Executive make the
covenants contained herein and that the Company would not have entered into this
Agreement unless it contained the covenants in this Section 8. The Executive
therefore agrees that for a period of two (2) years after the date of her
termination from employment with the Company, she will not, as an employee,
consultant, contractor, partner, shareholder, or in association with, any other
person, business or enterprise, except on behalf of the Company, directly or
indirectly, and regardless of the reason for her ceasing to be employed by the
Company:
(i) Engage in any business with any person or entity who: (A)
was a customer of the Company within the twelve (12) months
before the Executive's employment termination, and (B) with
whom Executive had contact to further the Company's business
or for whom Executive performed services, or supervised the
provision of services, during Executive's employment;
(ii) Hire, employ, recruit or solicit any employee or
consultant of the Company;
(iii) Solicit, induce or influence any employee, consultant or
customer of the Company to terminate his, her or its
employment or other relationship with the Company;
(iv) Engage or participate in, or in any other way render
services or assistance to, any business that competes,
directly or indirectly, with any product or service of the
Company that Executive participated in, engaged in, or had
Confidential Information regarding, during Executive's
employment. Ownership of less than 2% of the total outstanding
stock or securities of a competitor of the Company listed on a
national securities exchange is not a violation of this
Section; or
(v) Assist anyone in any of the activities listed above.
(b) Confidential Information. During the Executive's employment with
the Company, she will acquire and have access to confidential or proprietary
information about the Company and/or its customers, including but not limited
to, trade secrets, information relating to the Company's business, research,
marketing, sales, operations and products and plans for development of new
business products and services, operational designs and techniques related to
business, marketing and financial information or data concerning the Company's
business and business opportunities, information relating to the Company's
suppliers, vendors, consultants, agents and customers, including lists and
compilations of such persons and entities, information relating to the Company's
officers, directors and shareholders, including their respective abilities,
functions, conduct and compensation, proprietary information received or
developed under agreement or other arrangement by the Company and third parties,
and unpublished materials received or developed (including works of authorship)
which relate to the business of the Company and its investment strategies,
development plans, research and development data, and other technical
information. The foregoing shall be collectively referred to as "Confidential
Information". The Executive is aware that the Confidential Information is not
readily available to the public; accordingly, she also agrees that she will not
at any time (whether during or after the Employment Period), disclose to anyone
(other than her counsel in the course of a dispute arising from the alleged
disclosure of Confidential Information or as required by law) any Confidential
Information or utilize such Confidential Information for the benefit of herself
or any third party. The Executive agrees that these restrictions shall apply
whether or not any such information is marked "confidential" and regardless of
the form of the information. If the Executive becomes legally required to
disclose any Confidential Information, she will provide the Company with prompt
notice thereof so the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 8(b) to
permit a particular disclosure. If such protective order or other remedy is not
obtained or if the Company waives compliance with the provisions of this Section
8(b) to permit a particular disclosure, the Executive will furnish only that
portion of the Confidential Information that she is legally required to disclose
and, at the Company's expense, will cooperate with the Company to obtain a
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information. The Executive further agrees that all
memoranda, disks, files, notes, records or other documents, whether in
electronic form or hard copy (collectively, the "Material") compiled by her or
made available to her during her employment with the Company and/or its
predecessor (whether or not the Material constitutes or contains Confidential
Information), and in connection with the performance of her duties hereunder,
shall be the property of the Company and shall be delivered to the Company on
the termination of the Executive's employment with the Company or at any other
time upon request. Except in connection with the Executive's employment with the
Company, the Executive agrees that she will not make or retain copies or
excerpts of the Material.
(c) Remedies. If the Executive commits a breach, or is threatening to
commit a breach, of any of the provisions of Section 8(a) or (b), the Company
shall have the right to have the provisions of this Agreement specifically
enforced by any court having jurisdiction without being required to post bond or
other security and without having to prove the inadequacy of the available
remedies at law, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. In addition, the
Company may take all such other actions and remedies available to it under law
or in equity and shall be entitled to such damages as it can show it has
sustained by reason of such breach.
(d) Acknowledgements. The parties acknowledge that (i) the restrictions
imposed in Sections 8(a) and (b) are fair and reasonable and are reasonably
required to protect the Company's proprietary interests and other legitimate
business interests, and the goodwill associated with the Company's business;
(ii) the time, scope, geographic, and other provisions of this Section 8 have
been specifically negotiated by sophisticated parties represented by legal
counsel; and (iii) given the nature of the Company's business and given that
clients can be and are serviced by the Company wherever they are located, it is
impractical and unreasonable to place geographic limitations on the agreements
made by the Executive herein. If any covenant contained in Sections 8(a) and (b)
is held to be unenforceable by reason of its duration or geographic scope or its
being too extensive in any other respect, the parties agree (A) such covenant
shall be interpreted to extend over the maximum duration or geographic areas for
which it may be enforceable and over the maximum extent in all other respects as
to which it may be enforceable, all as determined by the court making such
determination, and (B) in its reduced form, such covenants shall be enforceable;
but such reduced form shall apply only with respect to the operation of such
covenant in the particular jurisdiction in or for which such adjudication is
made. Each of the covenants and agreements contained in this Section 8
(collectively, the "Restrictive Covenants") is separate, distinct and severable.
All rights, remedies and benefits expressly provided for in this Agreement are
cumulative and are not exclusive of any rights, remedies or benefits provided
for by law or in this Agreement, and the exercise of any remedy by a party shall
not be deemed an election to the exclusion of any other remedy (any such claim
by the other party being hereby waived). The existence of any claim, demand, or
cause of action of the Executive against the Company, whether based on this
Agreement or otherwise, shall not constitute a defense to the Company's
enforcement of any Restrictive Covenant. The unenforceability of any Restrictive
Covenant shall not affect the validity or enforceability of any other
Restrictive Covenant or other provisions of this Agreement. The Executive and
the Company understand and agree that the Restrictive Covenants and other
provisions in this Section 8 survive, and continue to be effective according to
their terms after, the termination of the Executive's employment and the
termination of this Agreement.
(e) Notification of Restrictive Covenants. Before accepting employment
or consulting work with any person, corporation or other entity during the
Employment Period or any period thereafter that the Executive is subject to the
restrictions set forth in Section 8(a) above, the Executive shall notify the
prospective employer, person or entity in writing of her obligations under such
provisions and shall simultaneously provide a copy of such written notice to the
Company.
(f) Tolling. The duration of the Restrictive Covenants set forth in
this Agreement shall not expire, and shall be tolled, during any period in which
the Executive is in violation of any of those covenants, and all restrictions
shall automatically be extended by the period of the Executive's violation of
any such covenants.
(g) Scope. As used in this Section 8, the term "Company" shall include
all subsidiaries and affiliates of the Company.
9. Intellectual Property
The Executive agrees that all materials created or modified by her
during the Employment Period including, without limitation, all works of
authorship, inventions, processes, ideas, methods, concepts and other tangible
and intangible materials (collectively, "Work Product"), shall be "work for
hire" and that the Company shall be the exclusive owner of the Work Product and
all intellectual property rights associated with the Work Product, including all
trademarks, patents or copyrights contained therein. To the extent any Work
Product does not qualify as "work for hire," the Executive hereby assigns
ownership of all such Work Product to the Company and agrees to take all
reasonable measures, at the Company's expense, to perfect such rights in the
Company. The Executive hereby appoints the Company as her attorney-in-fact with
the limited power to execute assignments of such Work Product.
10. Enforceability
The failure of any party to require performance by another party of any
provision shall not affect the right of that party thereafter to enforce the
same, nor shall it affect any other party's right to enforce the same or to
enforce any other provisions in this Agreement; nor shall the waiver by any
party of the breach of any provision hereof be held to be a waiver of any
subsequent breach of such provision or as a waiver of the provision itself.
11. Successors
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
12. Miscellaneous
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota, without reference to
principles of conflicts of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) Arbitration. To the fullest extent allowed by law, any
controversy, claim or dispute between Executive and the Company (and/or any of
its owners, directors, officers, employees, affiliates, or agents) relating to
or arising out of Executive's employment, the cessation of that employment
and/or any right or obligation under this Agreement will be submitted to final
and binding arbitration in the county in which Executive work(ed) for
determination in accordance with the American Arbitration Association's ("AAA")
National Rules for the Resolution of Employment Disputes, as the exclusive
remedy for such controversy, claim or dispute. In any such arbitration, the
parties may conduct discovery in accordance with the applicable rules of the
arbitration forum, except that the arbitrator shall have the authority to order
and permit discovery as the arbitrator may deem necessary and appropriate in
accordance with applicable state or federal discovery statutes. The arbitrator
shall issue a reasoned, written decision, and shall have full authority to award
all remedies which would be available in a judicial forum. The parties shall
share the filing fees required for the arbitration, provided that Executive
shall not be required to pay an amount in excess of the filing fees required by
a federal or state court with subject matter jurisdiction. The Company shall pay
the arbitrator's fees and any AAA administrative expenses. Any judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. However, notwithstanding anything to the contrary
contained herein, the Company shall have the right to seek and obtain
preliminary injunctive relief and other provisional remedies in aid of
arbitration or to preserve the status quo pending arbitration in an appropriate
judicial forum. BY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH THE
EXECUTIVE AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY JURY. This arbitration
agreement is to be construed as broadly as is permissible under applicable law.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: at the Executive's most recent address on the records
of the Company;
If to the Company:
Clearfield, Inc.
0000 Xxxxxx Xxxx X., Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Chairman
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) Xxxxxxxx-Xxxxx Act of 2002. Notwithstanding anything herein to
the contrary, if the Company determines, in its good faith judgment, that any
transfer or deemed transfer of funds hereunder is likely to be construed as a
personal loan prohibited by Section 13(k) of the Exchange Act and the rules and
regulations promulgated thereunder, then such transfer or deemed transfer shall
not be made to the extent necessary or appropriate so as not to violate the
Exchange Act and the rules and regulations promulgated thereunder.
(e) Section 409A. To the extent applicable, it is intended that the
compensation arrangements under this Agreement be in full compliance with the
provisions of Section 409A of the Internal Revenue Code and the guidance and
regulations promulgated thereunder ("Section 409A"). This Agreement shall be
administered in a manner consistent with this intent and the Executive agrees
the Company shall have the right to delay the payment, or to limit the form of
payment, of any amount under this Agreement to the extent the Company, in good
faith, determines that such delay or limitation is necessary to avoid adverse
tax consequences under Section 409A. Specifically, notwithstanding anything in
Sections 4 or 5 or any other provision of this Agreement to the contrary, if at
the Executive's Date of Termination, stock of the Company or any of its
affiliates is publicly traded on an established securities market or otherwise
and the Executive is a "Specified Employee" (as defined in Section 12(e)(i)) at
the Date of Termination, the Company shall defer the payment or commencement of
the payment, as the case may be, of any amounts described in Sections 4 or 5,
and any other payments or benefits payable under this Agreement, the deferral of
the payment or commencement of which is necessary to prevent any accelerated or
additional tax under Section 409A, that, in any such case, otherwise become
payable during the first six months following the Executive's Date of
Termination, until the earlier of (A) the first day of the seventh month
following the Executive's Date of Termination, or (B) the Executive's death. Any
payments or benefits delayed as a result of the preceding sentence shall be
accumulated and paid in a lump sum, without interest, as soon as practicable
after the first day of the seventh month following the Executive's Date of
Termination (or the Executive's earlier death). Thereafter, payments shall
resume in accordance with this Agreement. In addition, to the extent any
provision of this Agreement, including the foregoing provisions of this Section
12(e), is or will be in violation of Section 409A, this Agreement shall be
amended in such manner as the parties may agree such that the Agreement is or
remains in compliance with Section 409A and the foregoing intent of the parties
is maintained to the maximum extent possible. Each party is responsible for
reviewing this Agreement for compliance with Section 409A.
(i) For purposes of this Agreement, a "Specified Employee"
means, during the 12-month period beginning on April 1, 2007 or on April 1 of
any subsequent calendar year, an employee of the Company or its affiliates who
met the requirements of Section 416(i)(1)(A)(i), (ii) or (iii) of the Internal
Revenue Code (applied in accordance with the regulations thereunder and without
regard to Code Section 416(i)(5)) for being a "key employee" at any time during
the 12-month period ending on the December 31st immediately preceding such April
1st.
(f) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement. In the event any provision or term hereof
is deemed to have exceeded applicable legal authority or shall be in conflict
with applicable legal limitations, such provision shall be reformed and
rewritten as necessary to achieve consistency and compliance with such
applicable law.
(g) Withholding. The Company may withhold from any amounts payable
under this Agreement such federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation. In
addition, notwithstanding any other provision of this Agreement, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of any Excise Tax Gross-Up Payment (as defined
under the Company's Excise Tax Gross-Up Payment Plan), and the Executive hereby
consents to such withholding.
(h) No Waiver. The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 3(c) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(i) Entire Agreement. This Agreement and the agreements, policies,
plans and programs identified herein constitute the final, complete and
exclusive agreement between the Executive and the Company with respect to the
subject matter hereof and replace and supersede any and all other agreements,
offers or promises, whether oral or written, made to the Executive by the
Company or any affiliate or representative thereof. For purposes of removing
ambiguity and not in limitation of the foregoing, Executive and the Company
specifically agree that the prior Change of Control Agreement between them is
superseded by this Agreement and is accordingly null and void.
(j) Consultation With Counsel. The Executive acknowledges that she
has had a full and complete opportunity to consult with counsel and other
advisors of her own choosing concerning the terms, enforceability and
implications of this Agreement, and that the Company has not made any
representations or warranties to the Executive concerning the terms,
enforceability or implications of this Agreement other than as reflected in this
Agreement.
(k) Representation by Executive. The Executive represents that she
is not subject to any agreement, instrument, order, judgment or decree, or any
other form of obligation, that would prevent her from entering into this
Agreement or that would be breached upon performance of her duties under this
Agreement. Executive will defend and indemnify the Company with respect to any
claims, demands or causes of action which assert that this representation is not
true and correct.
(l) Counterparts. This Agreement may be executed simultaneously in
two counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
CLEARFIELD, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx
Its: Chief Financial Officer
---------------------------
By:
---------------------------
Its:
---------------------------
EXECUTIVE
/s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx
