WATERS INSTRUMENTS, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective July 1,
1995, by and between WATERS
INSTRUMENTS, INC. (the "Company"), a Minnesota
corporation, and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ (the "Executive"), an individual;
WITNESSETH:
WHEREAS, the Company believes that Executive
is valuable to the future
growth of the Company and its business and,
accordingly, the Company and
Executive mutually wish the Company to employ
Executive upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, the Company and Executive agree
as follows:
1. Employment. The Company employs
Executive and Executive accepts
employment as the President and chief executive
officer of the Company (the
"Position") upon the terms and conditions set out in
this Agreement. Executive
will perform service in the Position with all of the
rights, duties, powers and
fiduciary obligations implied by the titles
associated with the Position.
Executive will also have and perform such other
powers, responsibilities and
duties as are commensurate with the Position and as may
be assigned to Executive
by the Board of Directors of the Company (the
"Board") from time to time.
Executive will diligently and conscientiously devote
Executive's substantially
full time to the performance of Executive's services in
the Position.
The Company will include Executive on the
slate of directors that will
be submitted by the Company to the shareholders at
each annual meeting of the
shareholders during the Term (defined below). If
elected as a member of the
Company's Board, Executive agrees to serve as a
director without additional
compensation.
2. Annual Compensation. For Executive's
services in the Position,
Executive will receive an annual base salary (the "Base
Salary") at the rate of
One Hundred Forty Thousand Dollars ($140,000) per
year during the period
commencing on July 1, 1995, and ending upon the
termination
of the Term. On each
July 1 after June 30, 1996, during the Term,
Executive's Base Salary for the
succeeding twelve (12) month period will be increased by
the average percentage
change in the Consumer Price Index-Seasonally Adjusted
U.S. City Average For All
Items For All Urban Consumers published monthly in the
"Monthly Labor Review" of
the Bureau of Labor Statistics of the United
States Department of Labor
("CPI-U"), or similar report, for the twelve (12)
month period ending in the
month of May most recently ended, but in no event will
the Base Salary be less
than the Base Salary payable during the preceding twelve
(12) month period. The
Base Salary will be payable in bi-weekly or more
frequent installments.
3. Incentive Compensation. Executive will
accrue incentive compensation
("Incentive Compensation") in amounts as determined
in accordance with this
Section. For each fiscal year of the Company during
the Term, Executive will
prepare and submit to the Board, in good faith
consultation with the Board, a
proposed operating plan or budget which will include
a projected amount of
income before income taxes and extraordinary item(s)
that Executive anticipates
the Company will generate during such fiscal year (the
"Performance Period").
In good faith consultation with Executive,
the Board will approve an
operating plan or budget (the "Approved Budget") which
will include a projected
amount of income before income taxes and extraordinary
item(s) that the Board
anticipates the Company will generate during such
Performance Period (the
"Planned Operating Income"). In the absence of an
express determination
referring to this Section of this Agreement, the
Planned Operating income will
be the amount of income before income taxes and
extraordinary item(s) set out in
the first budget for a Performance Period that is
approved by the Board.
Contemporaneous with the Board's adoption of
an Approved Budget for a
Performance Period, the Board will in good faith
consultation with Executive
develop and adopt an incentive compensation plan
applicable to such Performance
Period pursuant to which Executive may earn up to
fifty percent (50%) of the
Base Salary then in effect for such Performance
Period. The Company and
Executive anticipate that the incentive compensation
plans are intended to
reward Executive for the Company achieving or exceeding,
to the extent possible,
the Planned Operating Income for the applicable
Performance Period. The
incentive compensation plan for the Company's fiscal
year ending June 30, 1996,
is attached to this Agreement.
Incentive Compensation that accrues, if any,
pursuant to this Section
will be paid, subject to other provisions of this
Agreement, in a lump sum each
August 31 during the Term and the first August 31
following the last Performance
Period if the Term ends. Interest will not accrue on
any accrued but unpaid
Incentive Compensation.
4. Benefits, Incentive Compensation and
Vacation. During the Term,
Executive will be eligible to participate in and to
be covered by, each life
insurance plan, 401(k) plan, disability plan,
health/medical insurance plan,
incentive compensation plan or other plan effective
with respect to executives
and officers of the Company in accordance with then
current policies of the
Company and the terms of any such plan. To the extent
there are any waiting or
qualification periods during which Executive may not
receive benefits under any
disability plan or health/medical insurance plan, the
costs of substantially
equivalent health/medical insurance benefits will be
borne by the Company.
The Company and Executive understand that the
Company will bear all of
the costs of health/medical insurance for Executive
and Executive's immediate
family. An appropriate upward adjustment to
Executive's payroll compensation
will be made if the Company's health/medical plans
require Executive to pay a
portion of the costs of health/medical insurance
benefits.
Executive will be entitled to such other
benefits and/or perquisites as
the Board may determine from time to time. During the
Term, Executive will be
entitled to such vacations as the Board and Executive
may determine from time to
time. Executive will accrue credited absence hours
("CASH") at the rate of one
hundred ninety-two (192) hours per year,
commencing August 1, 1993 and
thereafter as allowed under the Company's Associate
Absence Policy.
If no part of the incentive stock option
has been exercised, the
Executive and Company may separately agree to cancel
the Incentive Stock Option
Agreement dated August 18, 1993, between Executive
and Company under which
Executive may purchase fifty thousand (50,000)
shares of Common Stock of the
Company. Upon such cancellation, the Company agrees
to grant to Executive an
incentive stock option to purchase fifty thousand
(50,000) shares of Common
Stock of the Company pursuant to the planned Waters
Instruments, Inc. 1995 Stock
Option Plan at an option price to be determined under
the Plan.
5. Business Expenses. During the Term, the
Company will reimburse
Executive for all ordinary and necessary business
expenses incurred by Executive
in connection with the business of the Company,
including business expenses
incurred in connection with Executive's automobile.
Payment or reimbursement to
Executive will be made upon submission by Executive
of vouchers, receipts or
other evidence of such expenses in a form reasonably
satisfactory to the Company
and in compliance with applicable requirements of the
taxing authorities. The
Company and Executive agree Executive's home is
located in metropolitan
Minneapolis and Executive is away from home when he
leaves such metropolitan
area.
6. Term; Termination; Compensation Upon
Termination.
(a) The term (the "Term") of
Executive's employment under this
Agreement will begin on July 1, 1995, and
will continue until the Term
is terminated by the termination of
Executive's employment only as
permitted by this Agreement (the "Termination
Date").
(b) Executive's employment under this
Agreement will terminate:
(1) Upon Executive's death;
(2) Upon Executive's resignation;
or (3) Upon notice by the Company
to
Executive of termination.
(c) If Executive's employment under
this Agreement terminates
pursuant to Section 6(b)(1) upon Executive's
death, then the Company
will have no further obligation under this
Agreement or under any
applicable incentive compensation plan,
provided, however, that
Executive will be entitled to receive on
August 31, in the year
immediately following the Performance Period
in which Executive's death
occurred, Incentive Compensation under Section
3 determined as follows:
the Incentive Compensation that Executive
would have earned had
Executive's death not occurred will be
determined under Section 3 using
the Company's actual income before income
taxes and extraordinary
item(s) (the "Actual Operating Income") for
the Performance Period in
which such death occurred, the result will be
divided by the number of
months in the Performance Period and then
multiplied by the portion of
the Performance Period, expressed in
months, prior to Executive's
death.
(d) If Executive's employment under
this Agreement terminates
pursuant to Section 6(b)(2) upon
Executive's resignation, then the
Company will have no further obligation
under this Agreement or any
applicable incentive compensation plan,
including no obligation to pay
any accrued but unpaid Incentive
Compensation under Section 3 at any
time.
(e) If Executive's employment under
this Agreement terminates
pursuant to Section 6(b)(3) upon notice by the
Company, the Company's
only obligation under this Agreement and
any applicable incentive
compensation plan will be to pay Executive an
amount equal to the Base
Salary then in effect for one (1) year in
twenty-six (26) equal
bi-weekly installments beginning on the next
day on which the Company
makes its regular payroll payments, and
continue to pay for the twelve
(12) month period during which such
installments are payable, the cost
of all existing health/medical and other
benefit plans enjoyed by
Executive on the effective date of termination
(subject to the terms of
the plans) or provide substantially the same
benefits if the terms of a
plan exclude non-employees. Executive will
also be entitled to receive
on August 31, in the year immediately
following the Performance Period
in which a termination occurred under this
Subsection, Incentive
Compensation under Section 3 determined as
follows: the Incentive
Compensation that Executive would have
earned had Executive's
employment not been terminated under this
Subsection will be determined
under Section 3 using the Actual Operating
Income for the Performance
Period in which such termination occurred,
the result will be divided
by the number of months in the Performance
Period and then multiplied
by the portion of the Performance Period,
expressed in months, that
Executive was employed by the Company prior to
such termination.
If Executive desires to resign his employment,
Executive will give the
Company thirty (30) days prior written notice of the
date
of termination of the
Term.
7. Change in Control. A "Change in Control"
will be deemed to have
occurred when one person or several persons acting in
concert, who on July 1,
1995, did not beneficially own more than five percent
(5%) of the Company's
common stock, become the beneficial owners, directly
or indirectly through
affiliates, of fifty-one percent (51%) or more of the
Company's voting common
stock in a transaction or series of transactions.
A Change in Control will not include a
reorganization, recapitalization
or similar restructuring of the Company initiated by the
Company and approved by
the Board of Directors of the Company which involves a
change in the Company's
organizational form and not a substantive change in the
ownership of the Company
as it existed prior to such reorganization,
restructuring or recapitalization.
If Executive's employment under this Agreement
terminates pursuant to
Section 6(b)(3), within one (1) year of a Change in
Control, then upon such
termination in addition to the Company's obligation
under Section 6(e), the
Company will pay Executive an additional amount equal to
the Base Salary then in
effect for one (1) year in twenty-six (26) equal
biweekly installments
beginning on the next day on which the Company
makes its regular payroll
payments.
8. Confidentiality. Executive acknowledges that
during the term of this
Agreement, Executive may acquire knowledge of
certain of the Company's
confidential information, including without
limitation, information not
generally or publicly known and proprietary to the
Company about the Company's
operations, processes and products, and other
information from whatever source
that the Company is obligated to retain in confidence
or that is identified by
the Company as "confidential" or "trade secrets"
("Confidential Information").
Executive agrees that the Confidential Information is
of substantial value in
the Company s business and agrees (i) to keep the same
confidential, (ii) to not
disclose the Confidential Information to any person
or entity during or after
the term of this Agreement (iii) to not use any
Confidential Information in any
manner after the end of the Term for whatever reason,
and (iv) to return all
records of the Confidential Information to the Company
upon the end of the Term.
Executive's obligation of non-disclosure pursuant to
this Section does not apply
to information that is in the public domain through no
fault of Executive.
9. Inventions and Copyrightable Works.
Executive
acknowledges that
during the term of this Agreement, Executive may make
discoveries, improvements
or conceive of ideas, whether patentable or not,
relating directly or indirectly
to any of the Company's present or future operations,
processes and products, or
relating to work performed pursuant to Executive's
employment with the Company,
or involving the use of any time, material or
facility of the Company
("Inventions"). Executive further acknowledges that
during the Term, Executive
may create subject matter that is copyrightable
relating to the Company's
business ("Copyrightable Works").
(a) Inventions and Copyrightable Works are
the property of the Company
if made or conceived by Executive either solely or
jointly with others (i)
during the Term whether or not during normal
working hours and whether on
or off the Company s premises; or (ii) within one
year after the end of the
Term if the Inventions or Copyrightable Works
relate to products or
processes worked upon by Executive during the Term.
(b) Executive agrees to and hereby does
assign to the Company all of
Executive's rights to those Inventions and
Copyrightable Works (including
renewal rights to Copyrightable Works) described
in Section 9(a) which the
Company may feel are valuable in its present
or
future operations,
including copyrights (original or renewal) patent
applications and patents
together with all foreign counterparts,
divisions, continuations or
continuations-in-part applications and any
reissues or extensions thereof
(pursuant to any international conventions,
treaties or otherwise).
(c) Executive agrees to promptly and fully
disclose and describe to
the Company those Inventions described in Section
9(a).
(d) Executive agrees to acknowledge and
deliver promptly to the
Company all information and documents that may be
required to obtain and
maintain domestic or foreign Letters Patent and/or
copyrights for those
Inventions and Copyrightable Works described in
Section 9(a).
(e) Executive agrees not to assert any
rights in Inventions or
Copyrightable Works through claims of having made or
acquired them prior to
the date of this Agreement, if the Company
supported such Inventions or
Copyrightable Works with its funds, either
directly or indirectly.
(f) Executive agrees to return all records
of those Inventions and
Copyrightable Works described in Section 9(a) to
the Company upon the end
of the Term.
10. Agreement Not to Compete.
(a) During the Noncompetition Period
(defined below), unless
the Company waives its rights under this
Section in a writing
authorized by the Board, Executive will not,
directly or indirectly,
either for himself or as an owner, partner,
shareholder, director,
officer, employee, agent or consultant of
another, render services or
advice to any person or entity who is "in
competition with the Company"
anywhere in the United States. During the
Noncompetition Period neither
Executive or any business with whom Executive
may become associated
will recruit or solicit for employment any
person who is an employee of
the Company.
If the Term ends because of
Executive's resignation, then
"Noncompetition Period" will mean the Term
plus a period of twelve
(12) months after the end of the Term. If
the Term ends because of
notice by the Company to Executive
of termination, then
"Noncompetition Period" will mean the Term
plus a period of six (6)
months after the end of the Term.
A person or entity will be "in
competition with the Company"
only if such person or entity sells products
or services that actually
compete with the products or services of the
Company currently being
sold to the Company's then existing customers
at the time the Term ends
or, as to new products or services known of
by Executive during the
Term, will be first offered for sale to
existing or new customers
within six (6) months of the end of the Term.
Notwithstanding the foregoing,
Executive will not be
prohibited from being employed by a person or
entity "in competition
with the Company" if Executive's duties
with such person or entity
during the Noncompetition Period are
restricted so that they do not
involve in any respect products or services
that actually compete with
the products or services of the Company
currently being sold to the
Company's then existing customers at the time
the Term ends or, as to
new products or services known of by Executive
during the Term, will be
first offered for sale to existing or new
customers within six (6)
months of the end of the Term.
A person or entity will not be
"in competition with the
Company" if Executive's only involvement with
such person or entity is
the purchasing, acquiring or holding of not
more than a total of five
percent (5%) of the outstanding securities
of any publicly held
corporation.
(b) The Company will advise
Executive of its decision not to
waive the rights created under Section 10(a)
within ten (10) days after
receipt by the Company of written notice from
Executive of his intent
to voluntarily terminate his employment or at
the time his employment
is terminated by the Company or the Term ends
for any other reason. To
compensate Executive in the event of economic
hardship resulting from
the restriction on competition contained in
Section 10(a) the Company
will, subject to the satisfaction of the
conditions stated below, make
bi-monthly payments to Executive equal to one
twenty-sixth (1/26th) of
Executive's Base Salary, beginning with the
first month following the
end of the Term and continuing until the
end of the Noncompetition
Period or the restriction on competition is
expressly waived in writing
by the Company or one of the conditions
described below is no longer
met. The bi-weekly payments will be reduced by
any bi-weekly amounts of
compensation (exclusive of Incentive
Compensation) paid to Executive as
part of compensation on termination under
Section 6.
If the Company waives the rights
created under Section 10(a)
after written notice from Executive, as
contemplated in the preceding
paragraph, such waiver will not affect the
Company's obligations to pay
Executive compensation on termination under
Section 6.
(c) The foregoing compensation
obligation of the Company is
expressly conditioned on the occurrence of
each of the following:
(1) Executive must have
offered a position of
employment that
would involve a violation of
the restriction
against competition stated
in the first
sentence of Section 10(a) and
pay more than any
employment available to
him that would not
involve a violation of
such restriction,
and Executive must have
given the Company
written notice and
reasonable evidence
of those facts, and the
Company must have
continued to refuse to
waive the
restriction;
(2) Executive must
have
aggressively sought
employment
consistent with his education,
abilities, and
experience that would not
involve violation of
the restriction against
competition stated
in the first sentence of
Section 10(a) and
those efforts must have
been unsuccessful
or must have resulted in
his obtaining
employment paying him less
than his Base
Salary;
(3) Executive must have
provided the Company with
a written report of
his aggressive efforts to
find employment and
the result of those
efforts; and
(4) Executive must have
informed any prospective
employer, prior to
accepting employment, of
the existence of
this Agreement and provided
such prospective
employer with a copy.
11. Accounting, Remedies, etc.
(a) If Executive is found, in
a final judgment or
determination of any court of law having
jurisdiction, to have violated
any of his covenants or agreements under
Section 10, the Company will
be entitled to an accounting and repayment
of all compensation,
remuneration or other benefits Executive
received pursuant to Section
10(b) in addition to any injunctive relief or
other rights, remedies or
damages which the Company is or may be entitled
to at law, in equity or
under this Agreement.
(b) Executive and the Company agree
that if any provision of
Section 10 is held in a final judgment or
determination of any court of
law or administrative agency of competent
jurisdiction to be overbroad
or otherwise unenforceable in any respect,
such provision will be
deemed to be amended, and will be binding upon
Executive to the maximum
extent deemed reasonable and
enforceable
by such court or
administrative agency.
(c) The Company will be entitled
to injunctive relief
(temporary restraining order, preliminary
injunction and permanent
injunction) in the event of any actual or
threatened breach of Section
10(a) by Executive and the Company will not be
required to show actual
damages prior to obtaining such relief.
(d) If the Company sues Executive to
enforce claimed rights
under Section 10 and it is finally determined
by a non-appealable order
that Executive has not breached Section
10(a), the Company agrees to
pay the reasonable attorneys fees and other
costs and expenses incurred
by Executive in defending himself against the
Company's claims with
respect to such breach.
12. Limitation on Actions. Neither the
Company or Executive may
commence any action to enforce any rights arising under
this Agreement more than
one (1) year after the transaction or occurrence which
gave rise to the cause of
action.
13. Indemnity. If they desire to do so,
Executive and the Company will
enter into an Officers and Directors Indemnification
Agreement acceptable in
form and substance to both parties.
14. Notices. All notices required or
permitted under this Agreement
must be in writing and will be deemed to have been duly
given upon receipt and
will be delivered by hand or sent by registered or
certified mail, return
receipt requested, postage and fees prepaid and
addressed to the Company at its
principal office in Rochester, Minnesota and with
respect to Executive to such
address as appears on the books and records of the
Company. The Company and
Executive may change their addresses by a notice in
writing which will be
effective when actually received by the addressee.
15. Entire Understanding. This Agreement
constitutes the entire
understanding and agreement between the Company and
Executive with regard to the
terms of Executive's employment and there are no other
agreements, conditions or
representations, oral or written, express or
implied, with regard to such
employment. This Agreement may be amended only in
writing executed by both the
Company and Executive. A parties rights under this
Agreement may be waived only
in a writing executed by the waiving party and such
waiver will be effective
only with respect to the matters identified in such
writing.
16. Binding Effect. Executive may not assign
Executive's rights or
obligations under this Agreement. The provisions of
this Agreement are binding
upon and inure to the benefit of Executive's heirs,
legal representatives or
administrators. The obligations of Executive with
respect to confidential
information (Section 8) and Inventions and
Copyrightable Works (Section 9) will
survive and continue after termination of the Term.
17. Governing Law. This Agreement will be
construed and enforced in
accordance with the laws of the State of Minnesota.
IN WITNESS WHEREOF, the Company and
Executive have executed this
Agreement in the manner appropriate for each as of the
date on the first page of
this Agreement.
WATERS
INSTRUMENTS, INC.
By
Its
Chairman of the Board
of
Directors
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇
