AMENDED AND RESTATED AGREEMENT REGARDING EMPLOYMENT/COMPENSATION UPON CHANGE IN CONTROL
AMENDED
AND RESTATED AGREEMENT
REGARDING
EMPLOYMENT/COMPENSATION
UPON
CHANGE IN CONTROL
THIS
AMENDED AND RESTATED AGREEMENT is entered into as of SEPTEMBER
15,
2005,
by and between APA ENTERPRISES, INC., a Minnesota corporation
(herein called the "Company"), and ▇▇▇▇ ▇. ▇▇▇▇ (herein called the
"Executive").
WHEREAS,
Executive has been employed by the Company for many years and is currently
its President and Chief Executive Officer; and
WHEREAS,
Executive is a very important and valuable employee and the Company desires
to keep Executive in its service; and
WHEREAS,
the Company desires to provide suitable compensation to the Executive
should
his employment be terminated or substantially changed as a result of a "Change
in Control" as defined herein or otherwise without "Cause" as defined herein;
and
WHEREAS,
Executive acknowledges that this is not an employment agreement, but is
solely
intended to provide for employment security and compensation in the event of
termination of his employment in accordance with the terms and conditions of
this Agreement.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the parties hereto agree as follows:
1.
Definitions.
For the
purpose of this Agreement, the following words and phrases shall have the
following meanings:
(a) "Change
in Control" shall mean:
(i)
the
consummation of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to
which
shares of the Company's common stock would be converted into cash, securities,
or other property, other than a merger of the Company in which the holders
of
the Company's common stock immediately prior to the merger have the
same
proportionate ownership of common stock of the surviving corporation
immediately
after the merger; or
(ii)
any
sale,
lease, exchange, or other transfer (in one transaction or a series
of
related transactions) of all, or substantially all, of the assets of the
Company;
or
(iii) approval
by the shareholders of the Company of any plan or proposal for the liquidation
or dissolution of the Company; or
(iv) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
shall become
the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of 30% or more of the Company's outstanding stock; or
(v)
during
any period of two consecutive years, individuals who at the beginning
of such period constitute the entire Board of Directors shall cease for any
reason to constitute a majority thereof unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved
by
at
least two-thirds of the directors then still in office who were directors at
the
beginning of the two-year period.
(b) "Cause"
shall mean clear and convincing evidence of:
(i)
material
dishonesty by Executive involving the employer;
(ii) willful
violation of any law, rule, or regulation;
(iii) failure
or refusal to perform a material requirement of Executive's duties,
or failure or refusal to comply with a reasonable, important general policy
of
the
Company or its Board of Directors, after receipt by Executive of written
notice
specifying in detail the failure or refusal, and a reasonable time in which
to
perform;
(iv) breach
of
fiduciary duty to the employer; or
(v) Executive's
(a) death or (b) disability (by reason of physical or mental
disease, defect, accident or illness) such that Executive is or, in the opinion
of
two
independent physicians, one selected by the Company and one by Executive
or his representative, for purposes of making this determination, will be
unable
for an aggregate of 180 or more days during any continuous 12-month period
to
render the services required of him. In his then current position with the
Company.
(c) "Competitive
Activities" shall mean:
(i)
directly
or indirectly engaging in, continuing in, or carrying on any business
which substantially competes with the business conducted by the Company;
(ii) soliciting
or accepting orders for business on behalf of an entity other than the Company
from any persons (whether individuals or entities) who were
customers or bona fide prospects of the Company during the one-year period
prior
to
Executive's termination of employment or inducing or attempting to induce such
persons to terminate or modify their relationship with the Company for such
business; or
(iii) offering,
soliciting or agreeing to employ an employee of the Company,
or inducing or attempting to induce such an employee to quit his or her
employ
with the Company, without the prior written consent of the Company; Provided,
however, that the term "Competitive Activities" shall not include the ownership
of securities of corporations, which are listed on a national securities
exchange
or quoted on a national over-the-counter market, by the Executive in an amount
not exceeding 2% of the outstanding shares of any such
corporation.
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(d) "Date
of
Termination" shall mean:
(i) if
Executive's employment is terminated by the Company for disability, 90 days
after Notice of Termination is given to Executive (provided that Executive
shall
not have returned to the performance of Executive's duties on a full-time
basis
during such 90-day period); or
(ii) if
Executive's employment is terminated by the Company for any other reason,
90
days after Notice of Termination is given; provided, however, that
if
within 90 days after any Notice of Termination is given to Executive by the
Company
Executive notifies the Company that a dispute exists concerning the termination,
the Date of Termination shall be the date the dispute is finally determined,
whether by mutual agreement by the parties or upon final judgment, order,
or
decree of a court of competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected).
(e) "Good
Reason" shall mean any of the following (without Executive's express written
consent):
(i) Assignment
to Executive by the Company of duties inconsistent with Executive's position,
duties, responsibilities, and status with the Company immediately prior to
a
Change in Control of the Company, or a change in Executive's
titles or offices as in effect immediately prior to a Change in Control
of
the
Company, or any removal of Executive from or any failure to reelect or reappoint
Executive to any of such positions, except in connection with the termination
of his employment for disability, Retirement, or Cause or as a result
of
Executive's death or by Executive other than for Good Reasons;
(ii) A
reduction by the Company of Executive's base salary as in effect on
the
date hereof or as the same may be increased from time to time during the
term
of
this Agreement or the Company's failure to increase Executive's base
salary
(within 12 months of Executive's last increase in base salary) after a Change
in
Control of the Company in an amount which at least equals, on a percentage
basis, the average percentage increase in base salary for all executive officers
of the Company effected during the preceding 12 months;
(iii) Any
failure by the Company to continue in effect, or to provide a comparable
substitute for, any benefit plan or arrangement (including, without limitation,
any profit sharing plan, executive supplemental medical plan, group life
insurance plan, and medical, dental, accident, and disability plans) in which
Executive is participating at the time of a Change in Control of the Company
(or
any
other
plans providing Executive with substantially similar benefits) (hereinafter
referred to as "Benefit Plans"), the taking of any action by the Company that
would adversely affect Executive's participation in or materially reduce
Executive's benefits under any such Benefit Plan or deprive Executive of any
material fringe benefit enjoyed by Executive at the time of a Change in
Control
of the Company;
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(iv) Any
failure by the Company to continue in effect, or to provide a comparable
substitute for, any incentive plan or arrangement (including, without
limitation, any incentive compensation plan, long-term incentive plan, bonus
or
contingent bonus arrangements or credits, the right to receive performance
awards, or similar incentive compensation benefits) in which Executive is
participating,
or is eligible to participate, at the time of a Change in Control of the
Company
(or any other plans or arrangements providing him with substantially
similar
benefits) (hereinafter referred to as "Incentive Plans") or the taking of any
action by the Company which would adversely affect Executive's participation
in
any
such
Incentive Plan, expressed as a percentage of his base salary, by more than
ten
percentage points in any fiscal year as compared to the immediately preceding
fiscal year;
(v) Any
failure by the Company to continue in effect, or to provide a comparable
substitute for, any plan or arrangement to receive securities of the Company
(including, without limitation, any stock option plan or any other plan or
arrangement to receive and exercise stock options, stock appreciation rights,
restricted stock, or grants thereof) in which Executive is participating, or
is
eligible to participate, at the time of a Change in Control of the Company
(or
plans or arrangements providing him with substantially similar benefits)
(hereinafter
referred to as "Securities Plans") or the taking of any action by the Company
which would adversely affect Executive's participation in or materially
reduce
Executive's benefits under any such Securities Plan;
(vi) If
at the
time of a Change in Control of the Company Executive is employed at the
Company's principal executive offices, a relocation of such principal executive
offices to a location more than fifty miles outside of the Minneapolis-St.
▇▇▇▇
Metropolitan Area or, if Executive is not employed at the Company's
principal executive offices, Executive's relocation to any place other
than
the
location at which the Executive performed Executive's duties prior to a
Change
in
Control of the Company, except for required travel by Executive on the
Company's
business to an extent substantially consistent with Executive's business
travel obligations at the time of a Change in Control of the
Company;
(vii) Any
failure by the Company to provide Executive with at least the number
of
paid vacation days to which the Executive is entitled at the time of a
Change
in
Control of the Company;
(viii) Any
material breach by the Company of any provision of this
Agreement;
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(ix) Any
failure by the Company to obtain the assumption of this Agreement
by any successor or assign of the Company; or
(x) Any
purported termination of Executive's employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section
1
(f) hereof.
(f) "Notice
of Termination" shall mean a written notice which shall indicate those specific
termination provisions in this Agreement relied upon and which sets forth
in
reasonable detail the facts and circumstances claiming to provide a basis for
termination
of Executive's employment under the provisions so indicated. Any termination
by the Company pursuant to this Agreement shall be communicated by Notice of
Termination. For purposes of this Agreement, no such purported termination
by
the Company shall be effective without such Notice of Termination.
(g) "Retirement"
shall mean termination by the Company or Executive of Executive's
employment based on Executive's having reached age 65 or such other age
or
upon
such other terms as shall have been fixed in any arrangement established with
Executive's
consent.
2.
Separate
Employment Arrangements.
Executive is, and shall be, employed by the Company
solely upon the existing arrangements which are separate from this Agreement,
as
those
employment arrangements hereafter may be amended by the parties. The parties
expressly acknowledge
and agree that this Agreement is not intended to be an employment
agreement.
3.
Participation
in Other Executive Benefit Plans.
Nothing
in this Agreement shall in
any
manner modify, impair, or affect the existing or future rights or interests
of
Executive (a)
to
receive any employee benefits from the Company to which he would otherwise
be
entitled or (b) as a participant in any incentive, profit-sharing or bonus
plan,
stock option plan or pension plan
of
the Company. The rights and interests of Executive to any employee benefits
or
as a participant
or beneficiary in or under any or all such plans shall continue in full force
and effect. Executive shall have the right at any future time to become a
participant or beneficiary under or pursuant
to any and all such plans. Any compensation payable under this Agreement shall
not be deemed
salary or other compensation to Executive for purposes of any retirement plans
maintained by the Company or for purposes of any other fringe benefit
obligations of the Company.
4.
Nonassignability
of Benefits.
Executive shall not transfer, assign, encumber, or otherwise
dispose of his right to receive payments hereunder and, in the event of any
attempted transfer
or assignment, the Company shall have no further liability to Executive under
this Agreement.
5.
Payments
and Benefits upon a Change in Control.
If
Executive is employed by the
Company upon the occurrence of a Change in Control, the following provisions
shall govern:
(a) Executive
shall continue to be employed for at least thirty-six (36) months with
substantially the same duties, compensation, and benefits in the same geographic
location as existed just prior to the Change in Control.
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(b) Executive
may terminate his employment during the thirty-six (36) months
following the Change in Control for Good Reason, as defined herein, and, upon
such termination, shall receive from the Company in a lump sum, in cash, on
the
fifth (5th)
day
following the Date of Termination, an amount equal to two and one-half (2
1/2)
times
Executive's "annualized includible compensation for the base period" (as defined
in
Section 280G(d) of the Internal Revenue Code of 1986, as amended (the "Code")),
and shall
not
engage in any Competitive Activities for one year following the Date of
Termination.
(c) If
Executive's employment is terminated within thirty-six (36) months following
the Change in Control, other than for Cause as defined herein or as a result
of
his
Retirement, disability, or death, the Executive shall receive as severance
pay
in a lump
sum,
in cash, on the fifth (5th)
day
following the Date of Termination, an amount equal
to
two and one-half (2 1/2) times Executive's "annualized includible compensation
for
the
base period" (as defined in Section 280G(d) of the Code), and shall not engage
in any Competitive Activities for one year following the Date of
Termination.
(d) Executive
may terminate his employment other than for Good Reason upon
at
least three months' notice following the Change in Control, thereby waiving
any
further
benefits hereunder except a severance benefit of three months' salary and a
prorated
portion of any annual bonus, provided that Executive then agrees not to engage
in
any
Competitive Activities for six months following the Date of
Termination.
(e) If
Executive terminates his employment otherwise than under any of paragraphs
(b) or (d) of this Section 5, Executive shall not be entitled to any payments
for any period after the end of the employment and shall not receive any
severance benefit.
(f) If
the
Executive holds any options to purchase stock of the Company after a Change
in
Control, Executive shall be entitled, upon involuntary termination except for
Cause during the thirty-six (36) month period, to demand payment of the current
value of such
options (fair market value as of the Date of Termination less the then effective
exercise
price).
(g) If
the
lump sum severance payment provided for under this Section 5, calculated as
set
forth above, either alone or together with other payments which Executive has
the right to receive from the Company, would constitute an "excess parachute
payment" (as defined in Section 280G of the Code), such lump sum severance
payment shall be reduced to the largest amount as will result in no portion
of
the lump sum
severance payment under this Section 5 being subject to the excise tax imposed
by Section 4999 of the Code. The determination of any reduction in the lump
sum
severance payment
under this Section 5(g) pursuant to the foregoing sentence shall be made by
Executive in good faith, and such determination shall be conclusive and binding
on the Company.
(h) In
the
event of termination of Executive's employment for any reason, Executive shall
be entitled to continue to participate in the Company's group health plan for
employees following such termination. Executive shall be responsible for payment
of premiums.
This benefit shall be available until Executive's death or his election not
to
continue
such participation.
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6.
Payments
and Benefits Without a Change in Control.
In the
event that Executive's
employment with the Company is terminated by the Company without Cause before
a
Change in Control or more than 36 months after a Change in Control, Employee
shall be paid any bonus accrued at the Date of Termination and continuation
of
his salary for 24 months, payable at the end of every 3-month period after
the
Date of Termination.
7.
No
Obligation to Mitigate Damages; No Effect on Other Contractual
Rights.
(a) Executive
shall not be required to mitigate damages or the amount of any payment
provided for under Section 5 hereof by seeking other employment or otherwise,
nor
shall
the amount of any payment provided for under Section 5 be reduced by any
compensation
earned by Executive as the result of employment by another employer after the
Date of Termination, or otherwise.
(b) The
provisions of Section 5, and any payment provided for thereunder, shall not
reduce any amounts otherwise payable, or in any way diminish Executive's
existing rights, or rights which would accrue solely as a result of the passage
of time, under
any
Benefit Plan, Incentive Plan, Securities Plan, employment agreement, or other
contract, plan, or arrangement.
8.
Entire
Agreement; Headings.
This
Agreement is the entire Agreement between the
parties on its subject matter and shall be deemed to supersede any other
agreements allegedly made
between the parties regarding the subject matter. Without limitation of the
foregoing, this Agreement amends, restates and supersedes the Agreement
Regarding Employment/ Compensation
Upon Change in Control dated August 20, 1997. Headings shall not be utilized
in
any interpretation of this Agreement.
9.
Notices.
Any
notice or other communication provided for herein or given hereunder
shall be in writing and shall be delivered in person or, in the case of the
Company, to the
Board
of Directors, or mailed by first class registered or certified mail, postage
prepaid, addressed
to the Company at its registered office in the State of Minnesota and addressed
to the Executive or any other person at the last known address of such person
appearing on the books of
the
Company.
10. Amendment.
This
Agreement may not be changed, modified or amended except in wilting signed
by
both parties.
11. Waiver
of Breach.
The
waiver by either party of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
by either party.
12. Invalidity
of Any Provision.
The
provisions of this Agreement are severable, it being
the
intention of the parties hereto that should any provision hereof by invalid
or
unenforceable,
such invalidity or unenforceability of any provision shall not affect the
remaining provisions
hereof, but the same shall remain in full force and effect as if such invalid
or
unenforceable
provision or provisions were omitted.
7
13. Resolution
of Disputes.
Any
dispute or claim arising out of this Agreement, or breach
thereof, shall be decided by arbitration, under the commercial arbitration
rules
of the American Arbitration Association (the "AAA"), and shall be conducted
in
the Minneapolis, Minnesota
metropolitan area. Demand for arbitration hereunder may be made by either party
hereto
upon written notification to the other party. The arbitration shall be by a
single arbitrator mutually
selected by Executive and the Company. If the parties do not agree upon an
arbitrator within
20
days after the date of a demand for arbitration, the selection of the single
arbitrator shall be made in accordance with the rules of the AAA. This agreement
to arbitrate shall be specifically enforceable. Any decision rendered by the
arbitrator shall be final and binding, and judgment
may be entered upon it by any court having jurisdiction. The arbitrator shall
assess arbitration
fees, expenses, attorneys' fees, and compensation in accordance with the
applicable AAA rules. Nothing herein contained shall bar either party from
seeking equitable remedies in a court
of
appropriate jurisdiction.
14. Successors
and Assigns.
This
Agreement shall be binding upon, and inure to the benefit
of, the Company, its successors and assigns, and Executive, his heirs, legal
representatives
and assigns.
15. Governing
Law.
This
Agreement is being delivered and is intended to be performed
in the State of Minnesota and shall be construed and enforced in accordance
with
the laws of such state.
16. Counterparts.
This
Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but
one
and the same instrument.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day
and
year
first above written.