Exhibit (10)(w)
1998 EMPLOYMENT AND NONCOMPETITION AGREEMENT
This Employment and Noncompetition Agreement ("the Agreement") is made
this 13th day of March, 1998 by and between ▇▇▇▇▇▇ COMMUNICATIONS, INC., a
Minnesota corporation, its heirs, assigns, successors, or surviving
corporation that results from a merger ("Company") and M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
an individual who currently resides in Apple Valley, Minnesota (hereinafter
referred to as the "Employee").
RECITALS
WHEREAS, the Employee has served as a key employee of the Company for
many years and on the date hereof holds the position of Chief Financial
Officer and Secretary; and
WHEREAS, the Company desires to retain the services of the Employee in
order to assure continuity of management and to assist the Company in
operating the business, and the Employee desires to be retained by the
Company for such purposes upon the terms and conditions set forth in this
Agreement; and
WHEREAS, in consideration of, and as an inducement to, the Company
agreeing to enter into this Agreement, which the Employee agrees is
beneficial to him as it provides substantial additional rights to the
Employee, including but not limited to, the right to receive severance and
change of control payments, the Employee agrees not to compete with the
Company in accordance with the terms and conditions set forth in this
Agreement; and
WHEREAS, the Employee acknowledges and agrees that he has been advised
by the Company to have this Agreement reviewed by legal counsel of his own
choosing, and that he has consulted and conferred with such legal counsel to
the extent he deems advisable before signing this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the promises
and mutual covenants set forth in this Agreement, the Company and the
Employee agree and contract as follows:
1. EMPLOYMENT SERVICES. The Company hereby employs the Employee to
serve as Chief Financial Officer with responsibility for financial management
of the Company's businesses (the "Services"). It is understood that
regardless of whether the Company shall continue as a separate corporate
entity or through acquisition, merger or other transaction no longer be a
separate legal entity, that Employee as to these businesses, shall have the
duties, responsibilities and authority substantially the same as those of a
Chief Financial Officer of a business corporation pursuant to the Minnesota
Business Corporations Act except as may be determined by provisions of this
Agreement. It is further understood that the particular businesses of the
Company managed by Employee as Chief Financial Officer may change from time
to time, and Company and Employee agree that such changes may occur, as long
as the duties, responsibilities and authority are substantially equivalent to
those described herein, or Employee consents in writing to such new duties,
responsibilities and authority, which consent Employee will not unreasonably
withhold. Employee hereby agrees to provide, and to hold himself available
to provide the Services as his full-time occupation to the exclusion of other
full or part time services to any other party during the term of this
Agreement. The Employee hereby accepts such employment and shall in good
faith perform, for and on behalf and in the best interests of the Company,
the Services during the term of this Agreement.
2. TERM. Except as provided in Section 4 hereof the initial term of this
Agreement shall be three (3) years commencing on the effective date hereof,
April 1, 1998 (the "Effective Date"), and thereafter beginning with the third
anniversary of the Effective Date, will
2
automatically renew each year on the anniversary of that date for additional
one (1) year terms, unless 90 days preceding such third anniversary date and
each subsequent anniversary date for successive one-year terms, either party
gives written notice to the other of nonrenewal, in which case no further
automatic extensions shall occur.
3. COMPENSATION/BENEFITS. During the initial and subsequent renewal
terms of this Agreement, the Employee shall receive compensation from the
Company for the Services set forth in Section 1 as follows:
(a) BASE SALARY COMPENSATION. In consideration of Employee's
services, Employee will be paid, during the initial term of this Agreement,
no less than the following: $80,000 for calendar year 1998 (the "Salary").
The Salary will be payable in accordance with the Company's customary
payroll practices for its executive officers, but not less than monthly.
The Employee's Salary shall be reviewed by the Company and the Employee at
least annually for increase in a manner consistent with general
compensation changes Company-wide and applicable to the executive officers
as a group.
(b) CAR. The Company agrees to provide the Employee with and pay the
expense for an appropriate car for his business and other use.
(c) BONUS. The Company will continue to offer Employee a bonus
compensation program substantially in parity with that offered to all other
senior executives of the Company, and including the use of substantially
similar percentage of salary, minimum, target and maximum bonus amounts, or
performance, achievement, and other standards.
3
(d) STOCK OPTIONS. The Employee shall be entitled to receive such
stock options as are available and offered from time to time to other
senior executives of the Company consistent with Company policy.
(e) EXPENSE REIMBURSEMENT. The Company agrees to reimburse the
Employee for all reasonable and necessary business expenses incurred by the
Employee during the performance of his Services pursuant to this Agreement.
The Employee agrees to provide to the Company reasonable and customary
documentation of any expenses for which the Employee seeks reimbursement
from the Company pursuant to this Agreement.
(f) OTHER BENEFITS. The Employee shall be entitled to participate in
such compensation and retirement plans and receive such insurance,
vacation, profit sharing, retirement, and other benefits ("Other Benefits")
as are available to senior executives of the Company consistent with
Company policy, provided however, during Employee's employment under this
Agreement, Employee shall be provided and receive at least such other
benefits as he is provided and receives as of the Effective Date, or in
lieu thereof such substitute plans and benefits as provide him with
substantially equivalent Other Benefits.
4. TERMINATION. This Agreement and the Employee's employment with the
Company may be terminated only on the terms and conditions specified in this
Section upon the prior written notice to the other party as specified below. In
the event of the termination of this Agreement and the Employee's employment
with the Company, the Employee shall be entitled to compensation in accordance
with the following provisions.
(a) TERMINATION BY COMPANY FOR CAUSE. The Company may terminate this
Agreement for "Cause," as defined below, immediately upon written notice to
Employee,
4
and upon such termination for Cause, Employee shall cease to provide
Services hereunder as directed by the Chairman of the Board of Directors
upon receipt of notice of termination, unless the matter must first be
determined by arbitration or is subject to cure by the Employee as
provided in clause (i) hereof. "Cause" shall be defined as (i) a breach
by the Employee of the noncompetition provisions set forth in Section 5
hereof or the restrictions on use of Confidential Information set forth
in Section 6 hereof or substandard performance of a material part of the
Services as required in Section 1 hereof, as determined by a panel of
three arbitrators of the American Arbitration Association in
Minneapolis, Minnesota mutually chosen by Employee and Company and after
written notice of such alleged breach by Company to Employee and
Employee's failure to cure such alleged breach or alleged substandard
performance within 30 days thereof (if such alleged breach is subject to
cure), or (ii) willful and gross theft by the Employee from the Company,
or (iii) conviction of the Employee of any crime punishable as a felony.
(b) TERMINATION BY COMPANY OTHER THAN FOR CAUSE OR NON-RENEWAL BY THE
COMPANY. The Company may terminate this Agreement and the Employee's
employment with the Company upon ninety (90) days' written notice to the
Employee. In the event the Company terminates this Agreement and the
Employee's employment with the Company under this Section 4(b), or the
Company does not renew this Agreement at the end of the initial term or any
renewal term, the Company will pay as a severance consideration payable
monthly at the rate in effect prior to termination all of the following:
(i) all Salary for the unexpired initial or renewal term of the Agreement,
as the case may be, in accordance with the provisions of Section 3(a)
above; (ii) the expenses for continued use of a car for the unexpired
initial or renewal term of the Agreement, as the case may be, in
5
accordance with the provisions of Section 3(b) above; (iii) a bonus
equal to one-fortyeighth (1/48) of the sum of the bonus payouts made in
the preceding three (3) years plus bonus due at the end of the year in
which termination occurs, estimated during the year and adjusted at year
end, times the number of months remaining in the unexpired initial or
renewal term of the Agreement, as the case may be; (iv) as a lump sum,
all expense reimbursements due the Employee or submitted by the Employee
to the Company within 30 days after the notice of termination in
accordance with the provisions of Section 3(e) above; (v) continuance of
medical insurance coverage in force on the date of termination (or
comparable medical insurance coverage if the Company is not able to
continue the Employee's coverage under the Company's medical insurance
plan in force on the date of termination) until the later of the date
the Employee is provided medical insurance by a new employer, one year
after the date of termination or the unexpired initial or renewal term
of the Agreement, as the case may be; and (vi) in the event the payment
provided in Section 4(b)(i) above is less than one year's salary, a
severance payment which, when added to 4(b)(i) above, will pay out one
year's salary at the salary rate in effect on the date of termination.
(c) TERMINATION BY EMPLOYEE FOR GOOD REASON. The Employee may
terminate this Agreement and his employment with the Company for "Good
Reasons," as defined below, upon ninety (90) days' written notice to the
Company. In the event Employee terminates this Agreement and his
employment with the Company for "Good Reason," the Company will pay monthly
at the rate paid prior to termination all of the following: (i) all Salary
for the unexpired initial or renewal term of the Agreement, as the case may
be, in accordance with the provisions of Section 3(a) above; (ii) the
expenses for continued use
6
of the car for the unexpired initial or renewal term of the Agreement,
as the case may be, in accordance with the provisions of Section 3(b)
above; (iii) a bonus in accordance with the provisions of Section
4(b)(iii) above; (iv) all expense reimbursements due the Employee or
submitted by the Employee to the Company within 30 days after the notice
of termination in accordance with the provisions of Section 3(e) above;
(v) continuance of medical insurance coverage in accordance with the
provisions of Section 4(b)(v) above; and (vi) a severance payment in
accordance with the provisions of Section 4(b)(vi) above. As used
herein, "Good Reason" shall be defined as: (vi) a diminishment of
Employee's responsibilities, duties and authority as provided in this
Agreement; (vii) a reduction in the Employee's Salary or Bonus as
provided this Agreement; (viii) the failure by the Company to provide
Employee with all plans, programs or other benefits of the Company in
accordance with Section 3(b), (d), (e) and (f); (ix) relocation of
Employee's office outside of the seven (7) county Minneapolis/St. ▇▇▇▇
metropolitan area; (x) failure of any successors, assigns, or surviving
corporation or entity to assume and faithfully perform all of the
obligations of the Company under this Agreement as provided in Section
8(h) hereof; or (xi) the Company commission of any other material breach
of this Agreement, which is not remedied by the Company in a reasonable
period (but not less than ninety (90) days) after its receipt of written
notice thereof from Employee.
(d) TERMINATION FOR DISABILITY OF EMPLOYEE. In the event that the
Employee becomes totally disabled, the Company may terminate this Agreement
and the Employee's employment with the Company, and the Employee shall
receive all of the Compensation and Benefits described in Section 3 hereof
for one hundred eighty (180) days after notice of termination is delivered
to Employee.
7
(e) TERMINATION FOR DEATH OF EMPLOYEE. In the event of the death of
the Employee, this Agreement will automatically terminate, and no
compensation will be paid from the date of death except that expense
reimbursements and earned but unpaid bonus compensation will be paid to the
Employee's estate.
(f) TERMINATION BY EMPLOYEE FOR OTHER THAN GOOD REASON. The Employee
may terminate this Agreement and his employment with the Company upon
ninety (90) days' written notice to the Company. Compensation provided
under Section 3 above will cease upon such termination.
(g) TERMINATION NOT TO AFFECT NONCOMPETITION AND CONFIDENTIALITY
PROVISIONS. The termination of this Agreement and the Employee's
employment with the Company, by either party hereto, shall not affect the
prohibition on competition by Employee set forth in Section 5 hereof or the
confidentiality obligation of the Employee set forth in Section 6 hereof.
5. NONCOMPETITION.
(a) NONCOMPETE. Employee agrees that, during the term of this
Agreement and his employment with the Company and the five (5) year
period following the termination of this Agreement and his employment
with the Company, the Employee will not directly or indirectly, alone
or as partner, officer, director, advisor, consultant, or employee of
any other company or entity, engage in any, commercial activity in
competition with any part of the Company's business (which currently
involves videotape duplication, compact disc replication and
duplication and diskette duplication services to corporations,
publishers, religious and educational companies and other
institutional entities and the manufacture and
8
sale of gift products and collectibles to retailers) in those
states in which the Company conducted business during the term of
this Agreement or as of the date of such termination of this
Agreement and his employment with the Company, or with any part of
the Company's contemplated business with respect to which the
Employee has Confidential Information as defined below and governed
by Section 6 hereof. In addition, the Employee recognizes that the
Company's work force constitutes an important and vital aspect of
its business. The Employee agrees that during the term of this
Agreement and his employment with the Company and for the five (5)
year period following the expiration or termination of this
Agreement and his employment with the Company (whether terminated
early, whether for cause or not for cause), he shall not solicit,
or assist anyone else in the solicitation of any of the Company's
then current employees to terminate their employment with the
Company and to become employed by any other business enterprise.
(b) NONCOMPLIANCE. The Company shall not be required to make
payments to the Employee pursuant to Sections 4(b) or 4(c) while the
Company has, in its sole discretion, a good faith basis to believe
that the Employee is competing with the Company in violation of
Section 5(a). Any payments due during the period of competition
mentioned above shall be made to the Company to be held by the Company
in a segregated account and not paid over to the Employee until the
earlier of the date the Employee resumes compliance (whether
voluntarily, by court order or otherwise) with the noncompete
provision set forth in Section 5(a) or the expiration date of the
noncompete provision set forth in Section 5(a). No interest shall
accrue on payments held by the Company pursuant
9
to this Section 5(b). Good faith compliance with the payment
provisions of this Section 5(b) by any party to this Agreement
shall not be construed as a breach of this Agreement by such party.
(c) REMEDIES. It is agreed that it would be difficult or
impossible to ascertain the measure of damages to the Company
resulting from any breach of Section 5(a), and that injury to the
Company from any such breach may be irremediable, and that money
damages therefor may be an inadequate remedy. Notwithstanding
anything to the contrary in this Agreement, in the event of a breach
or threatened breach by the Employee of the provisions of Section
5(a), the Company shall be entitled to specific performance of Section
5(a) and may seek a temporary or permanent injunction to enjoin the
Employee from breaching Section 5(a), in addition to any other rights
or remedies that the Company may have available under applicable law
for such breach or threatened breach, including the recovery of
damages.
6. CONFIDENTIAL INFORMATION. The Employee will not, during or
following the termination of this Agreement and his employment with the
Company, for any reason use or disclose, other than in connection with
rendering of Services hereunder on behalf of the Company, any Confidential
Information to any person not employed by the Company or not authorized by
the Company to receive such Confidential Information, without the prior
written consent of the Company. "Confidential Information" means
information that is proprietary to the Company or proprietary to others and
entrusted to the Company. Confidential Information includes, but is not
limited to, customer lists, information relating to business plans and to
business that is conducted or anticipated to be conducted, and to
10
past or current or anticipated products. Confidential Information also
includes, without limitation, information concerning research,
development, purchasing, accounting, computer software, selling, and
services. The Employee will use reasonable and prudent care in
following written Company procedures or instructions furnished to
Employee to safeguard and protect and prevent the unauthorized use and
disclosure of Confidential Information. The obligations under this
Section 6 will not apply to (i) any Confidential Information that is now
or becomes available to the public through no breach of the Employees'
obligation of confidentiality; or (ii) the Employee's disclosure of any
Confidential Information required by law or judicial or administrative
process. Subject to the requirements of the Securities Exchange Act of
1934, nothing herein shall create a contractual restriction of
Employee's ability to sell, purchase, or effect transactions in the
Company's securities.
7. CHANGE OF CONTROL PAYMENT..
(a) PAYMENT. The Company and the Employee recognize that the
possibility of a "Change of Control" of the Company exists and that
such possibility, and the uncertainty and questions which it may raise
among management of the Company, may result in the departure or
distraction of the Employee to the detriment of the Company and its
stockholders. In order to induce the Employee to stay in the employ
of the Company in the event that the Company determines to pursue a
Change of Control of the Company and to use his best efforts to bring
about such a Change of Control, the Company agrees to pay the Employee
the following: (i) $100,000 in one lump sum payment which shall be
paid contemporaneously with the consummation of such Change of
11
Control transaction; provided, however, the Employee is employed by
the Company at the time of consummation of such Change of Control
and (ii) an additional $100,000 in one lump sum payment which shall
be paid on the date one year after consummation of such Change of
Control; provided, however, that either (iii) the Employee has been
employed by the Company (or its successor entity) during all of
such one year period or (iv) the Employee's employment with the
Company (or its successor entity) was terminated during such one
year period by the Company (or its successor entity) without Cause
pursuant to Section 4(b) or by the Employee for Good Reasons
pursuant to Section 4(c). The amounts payable under this Section
7(a) shall be payable to the Employee, at the option of the
Company, in cash, or by cashier's or certified check or by wire
transfer.
(b) CHANGE OF CONTROL. For purposes of this Agreement, a
"Change of Control" shall mean any one of the following: (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power (with respect to the election of
directors) of the Company's then outstanding securities; (ii) at any
time after the execution of this Agreement, the individuals who as of
the date of the execution of this Agreement constitute the Board (and
any new director whose election to the Board or nomination for
election to the Board by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in
office) cease for any reason to constitute a majority of the Board;
(iii)
12
the consummation of a merger or consolidation of the Company
with or into any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 70% of the combined
voting power (with respect to the election of directors) of the
securities of the Company or of such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the
consummation of a plan of complete liquidation of the Company or of an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's business or assets.
8. MISCELLANEOUS
(a) MODIFICATION. This Agreement supersedes all prior agreements and
understandings between the parties relating to the subject matter herein.
No modification, termination or attempted waiver of any provision of this
Agreement shall be valid unless in writing signed by the party against whom
enforcement is sought.
(b) ENFORCEABILITY AND SEVERABILITY. If any term of this Agreement
is adjudicated to be void, voidable, invalid or unenforceable for any
reason, such term shall be automatically severed from all other terms of
this Agreement, which will continue in full force and effect. In the event
any term is adjudicated to be overbroad as written, such term shall be
automatically amended to narrow its application to the extent necessary to
make such term enforceable, and such term shall be enforced as so amended..
(c) GOVERNING LAW. This Agreement and all remedies at law or in
equity shall be construed and enforced in accordance with the laws of the
State of Minnesota.
13
(d) PREVAILING PARTY. The prevailing party in any suit, proceeding
or hearing shall be entitled to recover from the non-prevailing party all
costs that the prevailing party has incurred as a result of the suit,
proceeding, or hearing, including, without limitation, reasonable
attorneys' fees, filing fees, arbitrator's fees, expert witness fees,
travels costs, and all other reasonable costs and expenses incurred in the
enforcement of this Agreement. In the event that neither party shall
prevail on all of its claims or all of its defenses, then such costs and
expenses shall be allocated and awarded between the parties as determined
by the arbitrator or the court.
(e) NOTICES. Any Notice or other communication required or permitted
under this Agreement shall, in order to be effective, be in writing and be
given by personal service or by prepaid, certified United States Mail or
Federal Express Courier, return receipt requested, addressed to the
applicable party at the address for such party set forth on the signature
page of this Agreement. Notice by service is effective upon service and
notice by mail or courier is effective upon mailing. Either party may
change the address to which notices for such party are to be sent by so
notifying the other party in the manner set forth above.
(f) CAPTIONS. The captions and headings contained in this Agreement
are for convenience only and do not define, limit, construe, or give full
notice of the contents of the provisions of this Agreement.
(g) ARBITRATION. Any controversy or claim arising out of this
Agreement, or any breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association and judgment upon the award may be entered in any
court having jurisdiction. Any such arbitration shall be in the State
14
of Minnesota in the seven-county Twin Cities' metropolitan area. In the
event the Company shall dispute and submit to arbitration hereunder the
Employee's claims regarding the renewal of this Agreement pursuant to
Section 2 hereof, or the termination of this Agreement pursuant to Section
4 hereof, or the amounts to be received by the Employee under Section 4
hereof, and the Company shall withhold from Employee the payments or
benefits provided under Section 4 hereof, the Company shall continue to
provide Employee with all compensation and benefits, at his then current
level, until an award in arbitration is rendered, and upon request by the
Chairman of the Board of Directors, the Employee shall be obligated to
continue his employment, perform any services for, and be present at the
Company. Notwithstanding the foregoing, any party to this Agreement may
seek and obtain injunctive or other appropriate equitable relief from a
court of competent jurisdiction to prevent or end a violation of this
Agreement that would cause irreparable harm to such party and for which it
would be difficult or impossible to determine damages that would arise from
such violation or the continuance thereof; provided, however, that the
substance of any dispute is to be resolved through arbitration as provided
in this Section 8(g) and that the course of equitable relief may include an
order compelling such arbitration.
(h) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company, its successors and assigns, and any corporation or entity with
which the Company may be merged or by which its assets, stock, operations,
business, ownership or control are acquired, and any such corporation or
entity, as a condition to the completion of such transaction with the
Company, shall absolutely, unconditionally and expressly in writing assume
all of the Company's obligations to faithfully perform this Agreement, and
15
the Employee shall be provided with a copy of such written assumption
agreement. This Agreement shall not be assignable by the Employee without
the prior written consent of the Company. All obligations and agreements
of the Employee under this Agreement shall be binding upon and enforceable
against the Employee and his executors, representatives, heirs, successors
or permitted assignees.
(i) ACKNOWLEDGMENT OF REPRESENTATION. The Company and the Employee
hereby acknowledge that ▇▇▇▇, Plant, ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, P.A. ("GPM")
represents the Company only, and no other person or entity a party to this
Agreement. The Company and the Employee hereby acknowledge that the
Employee, as an individual, has chosen either to represent himself, or has
reviewed this Agreement with legal counsel other than GPM.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
effective as of the date first set forth above.
▇▇▇▇▇▇ COMMUNICATIONS, INC. EMPLOYEE
By /S/ ▇.▇. ▇▇▇▇▇▇▇▇ /S/ M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------- ------------------------
Its CEO M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------ 8664 - ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
16