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EXHIBIT 10
EMPLOYMENT AGREEMENT
between
Minnesota Mining and Manufacturing Company
and
W. Xxxxx XxXxxxxx, Xx.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") dated as of December 4, 2000
(the "Agreement Date") between Minnesota Mining and Manufacturing
Company, a corporation incorporated under the laws of Delaware, with its
corporate headquarters in St. Xxxx, Minnesota (the "Company"), and
W. Xxxxx XxXxxxxx, Xx. ("Executive").
WHEREAS, the Company desires to employ Executive to serve as its Chief
Executive Officer and Chairman of its Board, upon the terms and subject
to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Company and Executive hereby agree as
follows:
Article I.
DEFINITIONS
The terms set forth below have the following meanings (such meanings to
be applicable to both the singular and plural forms, except where
otherwise expressly indicated):
1.1 "Accrued Annual Bonus" means the amount of any Annual Bonus earned
but not yet paid with respect to the Fiscal Year ended prior to the Date
of Termination.
1.2 "Accrued Base Salary" means the amount of Executive's Base Salary
which is accrued but not yet paid as of the Date of Termination.
1.3 "Actual Company Pension Benefits" means a single life annuity amount
commencing at age 62 and payable in monthly installments to Executive for
his life of the Actuarial Equivalent of the amounts that the Executive
has actually received, or is entitled to receive, from the Company's
Pension Plans.
1.4 "Actual Prior Employer Pension Benefits" means a single life annuity
amount commencing at age 62 and payable in monthly installments to
Executive for his life of the Actuarial Equivalent of the amounts that
the Executive has actually received, or is entitled to receive, from the
Prior Employer's Pension Plans.
1.5 "Actuarial Equivalent" of any amount shall be determined in
accordance with generally accepted actuarial principles using interest
rate, mortality and other methods and assumptions that the Pension
Benefit Guaranty Corporation ("PBGC") would use in determining the value
of an immediate annuity payment of benefits, or if such interest rate and
mortality assumptions are no longer published by the PBGC, interest rate
and mortality assumptions determined in a manner as similar as
practicable to the manner by
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which the PBGC's interest rate and mortality assumptions were determined
immediately prior to the PBGC's cessation of publication of such assumptions.
1.6 "Affiliate" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, Company.
For the purposes of this definition, the term "control" when used with
respect to any Person means the power to direct or cause the direction of
management or policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
1.7 "Agreement" -- see the recitals to this Agreement.
1.8 "Agreement Date" means the date specified in the recitals to this
Agreement.
1.9 "Anniversary Date" means any annual anniversary of the Commencement
Date.
1.10 "Annual Bonus" -- see Section 4.2(a).
1.11 "Annualized Total Compensation" means, as of any date, the sum of
Executive's Base Salary as of such date and the Target Annual Bonus
applicable to the year that includes such date.
1.12 "Base Salary" -- see Section 4.1.
1.13 "Beneficiary" -- see Section 10.5.
1.14 "Board" means the Company's Board of Directors.
1.15 "Cause" means any of the following:
(a) Executive's conviction of:
(i) a felony, or
(ii) a misdemeanor excluding a xxxxx misdemeanor (as
defined in Minnesota or a comparable misdemeanor under
the laws of another state) involving fraud, dishonesty
or moral turpitude,
other than Limited Vicarious Liability or a routine traffic
violation,
(b) Executive's material breach of this Agreement, provided that
such breach is not cured within 10 days after delivery to Executive of a
notice from the Board requesting cure,
(c) the willful or intentional material misconduct by Executive in
the performance of his duties under this Agreement, or
(d) the willful or intentional failure by Executive to materially
comply (to the best of his ability) with a specific, written direction of
the Board that is consistent with normal business practice and not
inconsistent with this Agreement and Executive's responsibilities
hereunder, provided that such refusal or failure (i) is not cured to the
best of Executive's ability within 10 days after the delivery thereof to
Executive and (ii) is not based on Executive's good faith belief, as
expressed by written notice to the Board given within such 10-day period,
that the implementation of such direction of the Board would be unlawful
or unethical.
For purposes of the preceding sentence, "Limited Vicarious Liability"
shall mean any liability which is (i) based on acts of the Company for which
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Executive is responsible solely as a result of his office(s) with
the Company and (ii) provided that (x) he was not directly involved in
such acts and either had no prior knowledge of such intended actions or
promptly acted reasonably and in good faith to attempt to prevent the
acts causing such liability or (y) he did not have a reasonable basis to
believe that a law was being violated by such acts.
For purposes of clause (b) and (c) above, Cause shall not include any one
or more of the following:
(i) bad judgment,
(ii) negligence,
(iii) any act or omission that Executive believed in good faith to have
been in or not opposed to the interest of the Company (without intent of
Executive to gain therefrom, directly or indirectly, a profit to which he
was not legally entitled), or
(iv) any act or omission of which any member of the Board who is not
a party to such act or omission has had actual knowledge for at least six
months.
1.16 "Change of Control" means any of the following events:
(a) any person (as such term is used in Rule 13d-5 under the Exchange
Act) or group (as such term is defined in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act), other than a Subsidiary or any employee benefit
plan (or any related trust) of Company or a Subsidiary, becomes the
beneficial owner of 20% or more of the Common Shares or of securities of
Company that are entitled to vote generally in the election of directors
of Company ("Voting Securities") representing 20% or more of the combined
voting power of all Voting Securities of Company;
(b) individuals who, as of the Agreement Date, constitute the Board (the
"Incumbent Directors") cease for any reason to constitute at least 50% of
the members of the Board; provided that any individual who becomes a
director after the Agreement Date whose election or nomination for
election by Company's shareholders was approved by a majority of the
members of the Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in connection with an
actual or threatened "election contest" relating to the election of the
directors of Company (as such terms are used in Rule 14a-11 under the
Exchange Act), "tender offer" (as such term is used in Section 14(d) of
the Exchange Act) or a proposed Merger (as defined below)) shall be
deemed to be members of the Incumbent Board;
(c) approval by the stockholders of Company of either of the following:
(i) a merger, reorganization, consolidation or similar transaction
(any of the foregoing, a "Merger") as a result of which the individuals
and entities who were the respective beneficial owners of Common Shares
and Voting Securities of Company immediately before such Merger are not
expected to beneficially own, immediately after such Merger, directly or
indirectly, more than 50% of, respectively, the common stock and the
combined voting power of the Voting Securities of the corporation
resulting from such Merger in substantially the same proportions as
immediately before such Merger, or
(ii) a plan of liquidation of Company or a plan or agreement for the
sale or other disposition of all or substantially all of the assets of
Company, other than such a sale or disposition to an entity which is,
directly or indirectly more than 50% owned by the Company or an entity of
which the individuals and entities who were the respective beneficial
owners of Common
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Shares and Voting Securities of Company immediately
before such sale or other disposition beneficially owned immediately
after such sale or other disposition directly or indirectly more than 50%
of, respectively, the common stock and the combined voting power of the
Voting Securities of the corporation to which such sale or other
disposition was made.
Notwithstanding the foregoing, there shall not be a Change in Control if,
in advance of such event, Executive agrees in writing that such event
shall not constitute a Change in Control.
1.17 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.18 "Commencement Date" means January 1, 2001.
1.19 "Committee" means the Compensation Committee of the Board.
1.20 "Common Shares" means the common shares, par value $0.01 per share,
of Company.
1.21 "Company" -- see the recitals to this Agreement.
1.22 "Competitor" -- see Section 9.1(b).
1.23 "Confidential Information" -- see Section 9.1(d).
1.24 "Date of Termination" means the effective date of a Termination of
Employment for any reason, including death or Disability, whether by the
Company or by Executive.
1.25 "Disability" means a mental or physical condition which, in the good
faith opinion of the Board, renders Executive, with reasonable
accommodation, unable or incompetent to carry out the material job
responsibilities which Executive held or the material duties to which
Executive was assigned at the time the disability was incurred, which has
existed for at least three months and which in the opinion of a physician
mutually agreed upon by Company and Executive (provided that neither
party shall unreasonably withhold such agreement) is expected to be
permanent or to last for an indefinite duration or a duration in excess
of six months.
1.26 "Employment Period" -- see Section 3.1.
1.27 "Exchange Act" means the United States Securities Exchange Act of
1934.
1.28 "Executive" -- see the recitals to this Agreement.
1.29 "Expiration Date" -- see Section 3.1.
1.30 "Expiration Notice" -- see Section 3.1.
1.31 "Fair Market Value" of a Common Share means, as of any date, the
average of the high and low prices of such security on such date reported
on the New York Stock Exchange Composite Transactions, rounded upwards to
the nearest $0.05, or if not so reported for the specified date, the
immediately preceding date for which the average is reported.
1.32 "Fiscal Year" means the calendar year period ending each December
31.
"Good Reason" means the occurrence of any one of the following events
unless Executive specifically agrees in writing that such event shall not
be Good Reason:
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(a) any material breach of the Agreement by the Company, including:
(i) the material failure of the Company to comply with the provisions
of Articles II, III, IV, V, VI or VII of this Agreement;
(ii) any material adverse change in the status, responsibilities or
perquisites of Executive;
(iii) any failure to nominate or elect Executive as Chief Executive
Officer of the Company or as Chairman of the Company's Board;
(iv) causing or requiring Executive to report to anyone other than the
Board;
(v) assignment of duties materially inconsistent with his positions
and duties described in this Agreement; or
(vi) the Company giving an Expiration Notice pursuant to Section 3.1,
provided, however, that no act or omission described in Subsection
1.33(a) shall constitute Good Reason unless Executive gives Company 30
days' prior written notice of such act or omission and the Company fails
to cure such act or omission within the 30-day period (except that
Executive shall not be required to provide such notice in case of
intentional acts or omissions by the Company),
(b) the failure of the Company to assign this Agreement to a successor
to the Company or failure of a successor to the Company to explicitly
assume and agree to be bound by the Agreement, or
(c) the requiring of Executive to be principally based at any office or
location more than 30 miles from the current corporate offices of Company
in St. Xxxx, Minnesota.
1.34 "Hypothetical Prior Employer Pension Benefits" means a benefit
payable in the form of a single life annuity amount commencing at age 62
and payable in monthly installments to Executive for his life equal to
one-twelfth (1/12th) multiplied by 50% of the Executive's highest average
annual compensation, where "highest average annual compensation" is the
annual average of the Executive's compensation for the three consecutive
calendar years out of the last ten calendar years preceding Termination
of Employment during which such average is the highest. For purposes of
determining Executive's highest average annual compensation, compensation
paid to Executive by the Company or the Prior Employer shall be taken
into account to the same extent such compensation would have been taken
into account for purposes of such determination under the Prior
Employer's Pension Plans if such compensation were with or paid by the
Prior Employer. In addition, solely for purposes of calculating the
Executive's compensation for this purpose, in the event of a Termination
Without Cause or a Termination for Good Reason, Executive shall be
treated as having earned the Severance Payment ratably over the course of
the Severance Period.
1.35 "Including" means including without limitation.
1.36 "Incumbent Directors" -- see Section 1.16(b).
1.37 "Initial Option" -- see Section 5.1.
1.38 "Initial Performance Units" -- see Section 5.5.
1.39 "Limited Vicarious Liability" -- see Section 1.15.
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1.40 "Make Whole Option" -- see Section 5.1.
1.41 "Make Whole Restricted Stock" -- see Section 5.8.
1.42 "Maximum Annual Bonus" -- see Section 4.2(b).
1.43 "Maximum Annual Goals" -- see Section 4.2(b).
1.44 "Merger" -- see Section 1.16(c).
1.45 "Notice of Consideration" -- see Section 8.1(b).
1.46 "Option" means an option to purchase Common Shares.
1.47 "Option Term" -- see Section 5.3(b).
1.48 "Other Accrued Benefit" means any right to benefits or payments not
expressly provided herein under the terms of the governing policy or
program which has irrevocably accrued as of the Date of Termination.
1.49 "PBGC" -- see Section 1.5.
1.50 "Pension Plan" means a defined benefit plan which is a qualified
retirement plan under Code Section 401(a) or a nonqualified retirement
plan or arrangement.
1.51 "Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation, entity or
government instrumentality, division, agency, body or department.
1.52 "Prior Employer" means General Electric Company.
1.53 "Pro Rata Annual Bonus" means an amount payable in cash equal to the
product of (a) the amount of the Target Annual Bonus to which Executive
would have been entitled if he had been employed by the Company on the
last day of the Fiscal Year that includes the Date of Termination and if
Executive had achieved his Target Annual Goals for such Fiscal Year,
multiplied by (b) a fraction of which the numerator is the numbers of
days which have elapsed in such Fiscal Year through the Date of
Termination and the denominator is 365.
1.54 "Pro Rata Retirement Benefit" -- see Section 7.1(b).
1.55 "Severance Multiple" means, if Executive receives a Severance
Payment under Section 8.3, the number by which Executive's Annualized
Total Compensation is multiplied under Section 8.3(b).
1.56 "Severance Payment" means the payment of a multiple of Executive's
Annualized Total Compensation pursuant to Section 8.3(b).
1.57 "Severance Period" means the number of years equal to the Severance
Multiple.
1.58 "Stock Ownership Program" -- see Section 5.1.
1.59 "Subsequent Options" -- see Section 5.2.
1.60 "Subsequent Performance Units" -- see Section 5.7.
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1.61 "Subsidiary" means, with respect to any Person, (a) any corporation
of which more than 50% of the outstanding capital stock having ordinary
voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other
class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by such Person, and (b) any partnership in
which such Person has a direct or indirect interest (whether in the form
of voting or participation in profits or capital contribution) of more
than 50%.
1.62 "Supplemental Retirement Benefit" -- see Section 7.1.
1.63 "Target Annual Bonus" -- see Section 4.2(b).
1.64 "Target Annual Goals" -- see Section 4.2(b).
1.65 "Taxes" means the incremental United States federal, state and local
income, excise and other taxes (including interest and penalties) payable
by Executive with respect to any applicable item of income.
1.66 "Tax Gross-Up Payment" means an amount payable to Executive such
that after payment of Taxes on such amount there remains a balance
sufficient to pay the Taxes being reimbursed.
1.67 "Termination For Good Reason" means a Termination of Employment by
Executive for a Good Reason, whether during or after the Employment
Period.
1.68 "Termination of Employment" means a termination by the Company or by
Executive of Executive's employment by the Company.
1.69 "Termination Without Cause" means a Termination of Employment by
Company for any reason other than Cause or Executive's death or
Disability, whether during or after the Employment Period.
1.70 "2001 Option" -- see Section 5.2.
1.71 "Voting Securities" -- see Section 1.16(a).
1.72 "Withholding Taxes" means any federal, state, provincial, local or
foreign withholding taxes and other deductions required to be paid in
accordance with applicable law by reason of compensation received
pursuant to this Agreement.
1.73 "Year of Service" shall mean the 12-month period beginning on the
Commencement Date and each 12-month period beginning on each Anniversary
Date thereafter in which Executive remains continuously employed by the
Company. In the event of a Termination Without Cause or a Termination
for Good Reason (whether during or after the Employment Period),
Executive shall also be credited with the number of Years of Service
equal to the Severance Period.
Article II.
DUTIES
2.1 Duties. The Company shall employ Executive during the Employment
Period as its Chief Executive Officer. Executive shall also be nominated
for election as a director of the Company at the earliest opportunity,
and upon such election the Board shall elect Executive to serve as its
Chairman effective January 1, 2001. During the Employment Period,
excluding any periods of disability, vacation, or sick leave to which
Executive is entitled,
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Executive shall perform the duties properly
assigned to him hereunder, shall devote substantially all of his business
time, attention and effort to the affairs of the Company and shall use
his reasonable best efforts to promote the interests of the Company.
2.2 Other Activities. Executive may serve on corporate, civic or
charitable boards or committees, deliver lectures, fulfill speaking
engagements or teach at educational institutions, or manage personal
investments, provided that such activities do not individually or in the
aggregate materially interfere with the performance of Executive's duties
under this Agreement.
Article III.
EMPLOYMENT PERIOD
3.1 Employment Period. Subject to the termination provisions
hereinafter provided, the term of Executive's employment under this
Agreement (the "Employment Period") shall begin on the Commencement Date
and end on the Anniversary Date which is three years after such date,
provided that for the period from the Agreement Date until the
Commencement Date, Executive shall be a part-time employee of the Company
providing the Company with such services as Executive determines he can
provide consistent with Executive's obligations to the Prior Employer.
Notwithstanding the preceding sentence, commencing on the first
Anniversary Date the Employment Period shall be extended each day by one
day to create a new two year term until, at any time at or after the
first Anniversary Date, the Company or the Executive delivers a written
notice (an "Expiration Notice") to the other party that the Agreement
shall expire on a date specified in the Expiration Notice (the
"Expiration Date") that is not less than 24 months after the date the
Expiration Notice is delivered by one party to the other party. The
employment of Executive by the Company shall not be terminated other than
in accordance with Article VIII.
Article 4.
COMPENSATION
4.1 Salary. The Company shall pay Executive in accordance with the
normal payroll practices of the Company (but not less frequently than
monthly) an annual salary at a rate of $1,300,000 per year ("Base
Salary") beginning on the Commencement Date. During the Employment
Period, the Base Salary shall be reviewed at least annually and may be
increased from time to time as shall be determined by the Committee,
after consultation with Executive. Any increase in Base Salary shall not
limit or reduce any other obligation of the Company to Executive under
this Agreement. Base Salary shall not be reduced at any time without the
express written consent of Executive.
4.2 Annual Bonus.
(a) The Company shall pay to Executive an annual bonus ("Annual
Bonus") for each Fiscal Year which begins during the Employment Period.
Executive shall be eligible for an Annual Bonus ranging from zero to the
Maximum Annual Bonus. Except as noted below, the Annual Bonus shall be
paid and otherwise subject to the terms of the Company's Executive Profit
Sharing Plan, as may be amended, and any successor to such plan.
(b) If Executive achieves his target performance goals (the "Target
Annual Goals"), as determined by the Committee on an annual basis after
consulting with Executive, such Annual Bonus shall be designed to realize
$2,200,000 (the "Target Annual Bonus"). Such performance goals shall be
set by the Committee
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within 90 days after the first day of the applicable
Fiscal Year. The actual amount of any Annual Bonus may fluctuate with
the Company's performance.
(c) The Company shall pay the Annual Bonus in a payment of cash,
Common Shares (including restricted shares), or a combination thereof
determined by the Committee at such times and in such manner as is
consistent with the treatment of other senior executives of the Company
and with the provisions of the Company's Executive Profit Sharing Plan or
its successor plan.
(d) Notwithstanding the above provisions of this Section 4.2, the
minimum Annual Bonus for the 2001 Fiscal Year shall be $2,400,000 of
which amount $1,440,000 shall be paid in cash and $960,000 shall be paid
in nonforfeitable unrestricted or restricted Common Shares.
Article V.
STOCK GRANTS AND PERFORMANCE UNITS GRANTS
5.1 Initial and Make Whole Option Grants. Company has granted to
Executive, effective as of the Agreement Date, an Option to purchase
400,000 Common Shares (the "Initial Option") and an option to purchase
200,000 Common Shares ("Make Whole Option"), subject to the terms of the
Company's 1997 Management Stock Ownership Program ("Stock Ownership
Program").
5.2 Subsequent Option Grants. In May 2001 the Committee shall grant
Executive an Option ("2001 Option") to purchase such number of Common
Shares as shall result in the 2001 Option having a Black-Scholes value of
$7,000,000 as of the date of grant, subject to the terms and conditions
of the Stock Ownership Program. The Committee shall in its discretion
consider Executive for possible future annual or other grants of Options
("Subsequent Options") for Fiscal Year 2002 and each Fiscal Year
thereafter during the Employment Period, as determined by the Committee
in its discretion based on Executive's performance and consistent with
the treatment of other senior executives of the Company. Such Subsequent
Options shall be subject to the terms of the Stock Ownership Program or
applicable successor program.
5.3 Terms and Conditions of Options.
(a) The exercise price of each Initial Option, Make Whole Option and
2001 Option, respectively, shall be the Fair Market Value of a Common
Share as of the Agreement Date (in the case of the Initial Option and
Make Whole Option) and as of the date of grant (in the case of the 2001
Option).
(b) Each Initial Option, Make Whole Option and 2001 Option (i) shall
have a term (the "Option Term") equal to 10 years commencing on its grant
date, and (ii) shall not be transferable by Executive during his
lifetime, except as permitted by the Stock Ownership Program.
(c) The Initial Option shall become exercisable in increments of 20% on
each of the first five Anniversary Dates, and the Make Whole Option shall
become exercisable in increments of one-third on each of the first three
Anniversary Dates, if Executive remains continuously employed by the
Company from the Commencement Date to each such applicable Anniversary
Date; provided that such Options shall each become exercisable in full
before such applicable Anniversary Dates, immediately upon a Termination
of Employment by reason of the death or Disability of Executive, a
Termination Without Cause, a Termination for Good Reason, or a Change of
Control. The 2001 Option shall become exercisable at the time or times
specified by the Committee at the date of grant in accordance with the
terms and conditions of the Stock Ownership Program and consistent with
the treatment of other senior executives of the Company.
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(d) Each Initial Option, Make Whole Option and 2001 Option may be
exercised after a Termination of Employment, to the extent exercisable as
of the Date of Termination (whether by reason of the proviso to the
preceding sentence or otherwise), as follows:
(i) in the event of a Termination of Employment by reason of death or
Disability of Executive, until two years after the Date of Termination,
(ii) in the event of a Termination Without Cause or a Termination for
Good Reason, until two years after the Date of Termination,
(iii) in the event of a Termination for Cause, such Option shall expire
on the Date of Termination, and
(iv) in the event of a Termination of Employment by Executive without
Good Reason (other than as a result of death or Disability), until 90
days after the Date of Termination,
provided, however, that in no event shall any Option be exercisable after
the expiration of the applicable Option Term.
(e) Each Subsequent Option (other than the 2001 Option) shall be
exercisable at times and on terms and conditions established by the
Committee in the grant of such Subsequent Option under the Stock
Ownership Program or applicable successor program.
5.4 Manner of Exercise of Options. An Option or any part thereof shall
be exercised by Executive or, if after his death, a Beneficiary, by a
written notice to Company stating the number of Common Shares with
respect to which the Option is being exercised and payment of the
exercise price of the Option and any Withholding Taxes in connection with
such exercise in accordance with the Stock Ownership Program or
applicable successor program. Company shall deliver the purchased Common
Shares promptly after its receipt of notice of exercise and payment.
5.5 Initial Performance Units. Company has granted to Executive with
respect to the performance period commencing January 1, 2001 and ending
December 31, 2003, ten thousand (10,000) performance units ("Initial
Performance Units"), subject to the terms of the Company's Performance
Unit Plan. The Initial Performance Units shall have a payment value per
unit at target equal to $100 per unit, a guaranteed minimum of $100.00
per unit and a maximum of $200.00 per unit. The unit value (subject to
the minimum guaranteed value) shall depend upon the degree to which
performance goals are achieved over the performance period.
5.6 Terms and Conditions of Initial Performance Units.
(a) Except as provided in (b) below, the Initial Performance Units
shall be subject in all respects to the terms and conditions of the
Company's Performance Unit Plan, as amended from time to time.
(b) The Executive shall vest in the Initial Performance Units at the
end of the initial performance period (December 31, 2003) if Executive
remains continuously employed by the Company from the Commencement Date
to the end of the initial performance period; provided, however,
Executive shall immediately become vested in the Initial Performance
Units in the event of Executive's Termination of Employment by reason of
death or Disability, a Termination Without Cause, a Termination for Good
Reason, or a Change of Control prior to the end of the initial
performance period. In the event of such accelerated vesting, the value
of the Initial Performance Units shall be an amount equal
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to the number
of Initial Performance Units, valued at target, multiplied by a fraction,
the numerator of which is the number of days which have elapsed
commencing January 1, 2001 and ending on the Date of Termination or
Change of Control and the denominator of which is the total number of
days from January 1, 2001 through December 31, 2003.
5.7 Subsequent Performance Units. The Committee shall in its discretion
consider Executive for possible future annual or other grants of
performance units ("Subsequent Performance Units") during the Employment
Period, as determined by the Committee in its discretion based upon
Executive's performance and consistent with the treatment of other senior
executives of the Company. Such Subsequent Performance Units shall be
subject to the terms of the Performance Unit Plan, as may be amended, or
applicable successor plan.
5.8 Make Whole Restricted Stock. The Company has granted to Executive
110,000 shares of Restricted Stock ("Make Whole Restricted Stock")
subject to the terms of the Stock Ownership Program. The Make Whole
Restricted Stock grant shall become vested in increments of 10% on each
of the first ten Anniversary Dates if the Executive remains continuously
employed by the Company from the Commencement Date to each such
Anniversary Date; provided, however, that upon a Termination Without
Cause or a Termination for Good Reason on or after the third Anniversary
Date, the vesting percentage determined under the preceding clause of
this sentence shall be increased by 30 percentage points (but not in
excess of 100%); provided, further, that upon a Termination Without Cause
or a Termination for Good Reason prior to the third Anniversary Date, the
aggregate vesting percentage for the Make Whole Restricted Stock shall be
50%; and provided, further, that Executive shall immediately become
vested in all of the Make Whole Restricted Stock in the event of
Executive's Termination of Employment by reason of death or Disability,
or a Change of Control. Executive shall be paid in cash an amount equal
to the dividends payable in respect of the Make Whole Restricted Stock
(whether or not vested) as and when dividends are paid on Common Shares
generally. If Executive has a Termination of Employment (other than by
reason of death or Disability) prior to vesting in all of the Make Whole
Restricted Stock, the shares of Make Whole Restricted Stock which are not
vested as of the Date of Termination shall be forfeited (and the payment
of dividends in respect of such shares shall cease) unless the Committee
in its sole discretion determines to vest all or any portion of the
unvested shares.
Article VI.
OTHER BENEFITS
6.1 Incentive, Savings and Retirement Plans. In addition to Base Salary
and an Annual Bonus, Executive shall be entitled to participate during
the Employment Period in all incentive, savings and retirement plans,
practices, policies and programs that are from time to time applicable to
other senior executives of the Company in accordance with their terms as
in effect from time to time.
6.2 Welfare Benefits. During the Employment Period, Executive and/or
his family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company (including medical,
prescription, dental, disability, salary continuance, employee life,
group life, dependent life, accidental death and travel accident
insurance plans and programs) applicable to other senior executives of
the Company in accordance with their terms as in effect from time to
time.
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6.3 Fringe Benefits. During the Employment Period, Executive shall be
entitled to fringe benefits applicable to other senior executives of the
Company.
6.4 Vacation. During the Employment Period, Executive shall be entitled
to paid vacation time in accordance with the plans, practices, policies,
and programs applicable to other senior executives of the Company, but in
no event shall such vacation time be less than four weeks per calendar
year.
6.5 Expenses. During the Employment Period, Executive shall be entitled
to receive prompt reimbursement for all reasonable employment-related
expenses incurred by Executive upon the receipt by the Company of an
accounting in accordance with practices, policies and procedures
applicable to other senior executives of the Company.
6.6 Office; Support Staff. During the Employment Period, Executive
shall be entitled to an office or offices of a size and with furnishings
and other appointments, and to personal secretarial and other assistance,
appropriate to his position and duties under this Agreement.
6.7 Tax Gross-Up Payment. If it shall be determined that any payment to
Executive pursuant to this Agreement or any other payment or benefit from
the Company, any Affiliate, or any other person would be subject to the
excise tax imposed by Section 4999 of the Code or any similar tax payable
under any United States federal, state, local or other law, then
Executive shall receive a Tax Gross-Up Payment with respect to all such
excise taxes and similar taxes.
6.8 Relocation Expenses. Company shall pay Executive's reasonable
expenses related to the relocation of his primary residence to the
Minneapolis - St. Xxxx, Minnesota area, in accordance with Company's
relocation policy applicable to senior executives, including expenses of
periodic travel between Executive's current primary residence and
Minneapolis-St. Xxxx and reasonable temporary living expenses for the
Executive and his family for a period not to exceed one year from the
Agreement Date. The relocation payments shall also include provision for
the Company to purchase Executive's current principal residence as
provided below. If any payment of relocation expenses (other than
payments with respect to the purchase of Executive's principal residence)
is subject to Taxes, the Company shall pay Executive a Tax Gross-Up
Payment with respect to such Taxes. From the Commencement Date through
March 31, 2001, the Company shall have no obligation to purchase
Executive's current principal residence. During such period, the
Executive shall take such steps as are practicable to sell such residence
at then-prevailing value. In the event Executive does not sell his
current principal residence on or prior to March 31, 2001, as soon as
practicable after such date the Company shall purchase, or cause
Executive's current principal residence to be purchased, at the then-
prevailing value as determined by an appraiser mutually agreed upon by
the Company and the Executive for this purpose. The purchase shall be on
such terms and conditions as are generally contained in transactions of
such nature.
Article VII.
SUPPLEMENTAL RETIREMENT BENEFIT
7.1 Supplemental Retirement Benefit. Executive shall be entitled to the
following supplemental retirement benefit (the "Supplemental Retirement
Benefit") in accordance with the terms of this Article VII:
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(a) Upon Completion of 10 Years of Service. Upon the completion of at
least 10 Years of Service, Executive shall receive a Supplemental
Retirement Benefit equal to:
(i) the Hypothetical Prior Employer Pension Benefits,
minus
(ii) the sum of the Actual Prior Employer Pension Benefits, Actual
Company Pension Benefits, and benefits paid or payable to Executive under
any other employer's Pension Plan with respect to service prior to the
Commencement Date.
If the remainder is zero or less, no amount shall be payable by Company
hereunder.
(b) Upon Completion of Less Than 10 Years of Service. Upon completion
of less than 10 Years of Service, Executive shall receive a prorated
Supplemental Retirement Benefit (the "Pro Rata Retirement Benefit")
determined by multiplying the Supplemental Retirement Benefit described
in Section 7.1(a) above by a fraction (not to exceed 1.0), the numerator
of which is the number of Executive's whole and partial Years of Service
as of the date of the Termination of Employment and the denominator of
which is 10.
7.2 Payment. Any benefits payable under this Article VII shall be paid
as of the Date of Termination or, if earlier, the first date of a Change
of Control in a lump sum equal to the Actuarial Equivalent present value
of an annuity described in Subsection 7.1(a) or (b) above. In the event
of a Termination of Employment by reason of Executive's death, the amount
of such lump sum payment to the Beneficiary shall equal the lump sum
payment that would have been payable to Executive if he had been alive on
the Date of Termination and had been fully vested as to the Supplemental
Retirement Benefit or, if applicable, Pro Rata Retirement Benefit. The
benefit may also be paid in the form of a commercially available annuity
or life insurance contract that is mutually agreeable to the parties.
7.3 Vesting. Executive shall become fully vested in the benefits under
this Article VII on the fifth Anniversary Date provided the Executive
remains continuously employed by the Company from the Commencement Date
to such fifth Anniversary Date, except that, in the event of Executive's
Termination of Employment by reason of death or Disability, a Termination
Without Cause, a Termination for Good Reason, or a Change of Control,
Executive shall immediately be vested as to such benefits. If Executive
shall have a Termination of Employment for any other reason prior to
completion of five Years of Service or prior to the first date of a
Change of Control, Executive shall forfeit and shall not receive any
portion of the Supplemental Retirement Benefit.
7.4 Other Retirement Benefits. Executive shall participate in, and be
entitled to benefits under, any other retirement plans of the Company
which are not qualified under Section 401(a) of the Code, to the extent
provided in such plan or arrangement.
Article VIII.
TERMINATION BENEFITS
8.1 Termination for Cause or Other Than for Good Reason, etc.
(a) If Company terminates Executive's employment for Cause or Executive
terminates his employment other than for Good Reason, death or
Disability,
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Company shall pay to Executive immediately after the Date of
Termination an amount equal to the sum of Executive's Accrued Base
Salary, Accrued Annual Bonus, and Other Accrued Benefits and Executive
shall not be entitled to receive any Severance Payment.
(b) Company may not terminate Executive's employment for Cause unless:
(i) no fewer than 30 days prior to the Date of Termination, Company
provides Executive with written notice (the "Notice of Consideration") of
its intent to consider termination of Executive's employment for Cause,
including a detailed description of the specific reasons which form the
basis for such consideration;
(ii) after providing Notice of Consideration, the Board may, by the
affirmative vote of a majority of its members (excluding for this purpose
Executive if he is a member of the Board, any other management member of
the Board and any other member of the Board reasonably believed by the
Board to be involved in the events leading to the Notice of
Consideration), suspend Executive with pay until a final determination
pursuant to this Section has been made;
(iii) on a date designated in the Notice of Consideration, which date
shall be at least 30 days following the date the Notice of Consideration
is provided, Executive shall have the opportunity to appear before the
Board, with or without legal representation, at Executive's election, to
present arguments and evidence on his own behalf; and
(iv) following the presentation to the Board as provided in (iii)
above or Executive's failure to appear before the Board at the date and
time specified in the Notice of Consideration, Executive may be
terminated for Cause only if the Board, by the two-thirds vote of its
members (excluding Executive if he is a member of the Board, any other
management member of the Board and any other member of the Board
reasonably believed by the Board to be involved in the events leading the
Board to consider terminating Executive for Cause), determines that the
actions or inactions of Executive specified in the Notice of Termination
occurred, that such actions or inactions constitute Cause, and that
Executive's employment should accordingly be terminated for Cause.
8.2 Termination for Death or Disability. If, before the end of the
Employment Period, Executive's employment terminates due to his death or
Disability, Company shall pay to Executive or his Beneficiaries, as the
case may be, immediately after the Date of Termination an amount which is
equal to the sum of Executive's Accrued Base Salary, Accrued Annual
Bonus, Pro Rata Annual Bonus, and Other Accrued Benefits.
8.3 Termination Without Cause or for Good Reason. In the event of a
Termination Without Cause or a Termination for Good Reason (whether
during or after the Employment Period), subject to Section 8.5 Executive
shall receive the following:
(a) immediately after the Date of Termination, a lump sum cash amount
in immediately available funds equal to the sum of Executive's Accrued
Base Salary, Accrued Annual Bonus, Pro Rata Annual Bonus, and Other
Accrued Benefits;
(b) immediately after the Date of Termination, a lump sum cash amount
in immediately available funds equal to three (3) times Executive's
Annualized Total Compensation;
(c) the benefits (or, if such benefits are not available, the value
thereof) specified in Section 6.2 to which Executive is entitled as of
the Date of
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Termination for the Severance Period, provided that such
benefits shall be reduced by any similar benefits provided by a
subsequent employer; provided further that (i) with respect to any
benefit to be provided on an insured basis, such value shall be the
present value of the premiums expected to be paid for such coverage, and
with respect to other benefits, such value shall be the present value of
the expected net cost to Company of providing such benefits and (ii) from
and after the Date of Termination, Executive shall not become entitled to
any additional awards under Section 6.1 or any plans, practices, policies
or programs of the Company; and
(d) immediately after the Date of Termination, a lump-sum amount in
immediately available funds of any amount then payable to Executive
pursuant to Section 6.7.
8.4 Other Termination Benefits or Remedies. The amounts payable
hereunder are in lieu of any other termination or severance payments or
benefits entitlement of Executive, including under any other programs of
the Company, any Subsidiary or their Affiliates. The amounts payable
hereunder shall reduce and be in full satisfaction of any statutory
entitlement (including notice of termination, termination pay and
severance pay) of Executive upon a Termination of Employment, and shall
constitute Executive's exclusive remedy for any damages relating to a
Termination of Employment for any reason.
8.5 General Release. Executive's rights to payment under Section 8.3
shall be contingent upon the Executive's execution of a general release
of any and all claims Executive may have, whether known or not known,
against Company, the Subsidiaries, Affiliates and their past and present
directors, officers, and employees and agents, for events or causes of
action occurring through the date of the release, including those arising
from Executive's employment or Termination of Employment hereunder. The
release shall be substantially the form attached hereto as Attachment A
as may be required by Company.
Article IX
RESTRICTIVE COVENANTS
9.1 Non-Solicitation of Employees; Confidentiality; Non-Competition.
(a) Executive covenants and agrees that, during the Employment Period and
during the one-year period immediately following any Termination of
Employment, Executive will not:
(i) directly or indirectly employ or seek to employ any person
employed at that time by Company or any of its Subsidiaries or otherwise
encourage or entice any such person to leave such employment;
(ii) become employed by, enter into a consulting arrangement with or
otherwise agree to perform personal services for a Competitor (as defined
in Section 9.1(b));
(iii) acquire an ownership interest in a Competitor, other than not more
than a 2% equity interest in a publicly-traded Competitor; or
(iv) solicit any customers or vendors of Company or its Subsidiaries on
behalf of or for the benefit of a Competitor.
(b) For purposes of this Section, "Competitor" means any Person which
sells goods or services in the geographic area described below, which
goods or services are the same or similar to (or may be used as a
substitute therefore) those sold by a business that (i) is being
conducted by Company or any
72
Subsidiary in the geographic area at the time
in question and (ii) was being conducted by Company or any Subsidiary in
the geographic area on the date of Executive's Termination of Employment.
(c) Executive covenants and agrees that at no time during the Employment
Period nor at any time following any Termination of Employment will
Executive communicate, furnish, divulge or disclose in any manner to any
Person any Confidential Information (as defined in Section 9.1(d))
without the prior express written consent of Company. After a
Termination of Employment, Executive shall not, without the prior written
consent of the Company, or as may otherwise be required by law or legal
process, communicate or divulge such Confidential Information to anyone
other than the Company and those designated by it.
(d) For purposes of this Section, "Confidential Information" shall mean
financial information about the Company, contract terms with vendors and
suppliers, customer and supplier lists and data, trade secrets and such
other competitively-sensitive information to which Executive has access
as a result of his positions with the Company, except that Confidential
Information shall not include any information which was or becomes
generally available to the public (i) other than as a result of a
wrongful disclosure by Executive, (ii) as a result of disclosure by
Executive during the Employment Period which he reasonably and in good
faith believes is required by the performance of his duties under this
Agreement, or (iii) any information compelled to be disclosed by
applicable law or administrative regulation; provided that Executive, to
the extent not prohibited from doing so by applicable law or
administrative regulation, shall give Company written notice of the
information to be so disclosed pursuant to clause (iii) of this sentence
as far in advance of its disclosure as is practicable.
9.2 Injunction. Executive acknowledges that monetary damages will not
be an adequate remedy for Company in the event of a breach of this
Article IX, and that it would be impossible for Company to measure
damages in the event of such a breach. Therefore, Executive agrees that,
in addition to other rights that Company may have, Company is entitled to
an injunction preventing Executive from any breach of this Article IX.
Article X.
MISCELLANEOUS
10.1 Public Announcement. The Company shall give Executive a reasonable
opportunity to review and comment on any public announcement (including
any filing with a governmental agency or stock exchange) relating to this
Agreement or Executive's employment by the Company.
10.2 Approvals. The Company represents and warrants to Executive it has
taken all corporate action necessary to authorize this Agreement.
10.3 No Mitigation. In no event shall Executive be obligated to seek
other employment or take any other action to mitigate the amounts payable
to Executive under any of the provisions of this Agreement, nor shall the
amount of any payment hereunder be reduced by any compensation earned as
result of Executive's employment by another employer, except that any
continued welfare benefits provided for by Section 6.2 and 8.3 shall not
duplicate any benefits that are provided to Executive and his family by
such other employer and shall be secondary to any coverage provided by
such other employer to the extent permitted by law.
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10.4 Enforcement. If Executive and the Company have a dispute regarding
Executive's entitlement to compensation and benefits under this
Agreement, and if Executive shall prevail in such dispute, the Company
shall reimburse Executive's reasonable legal fees and other expenses
incurred in such effort.
10.5 Beneficiary. If Executive dies prior to receiving all of the
amounts payable to him in accordance with the terms and conditions of
this Agreement, such amounts shall be paid to the beneficiary
("Beneficiary") designated by Executive in writing to Company during his
lifetime, or if no such Beneficiary is designated, to Executive's estate.
Such payments shall be made in a lump sum to the extent so payable and,
to the extent not payable in a lump sum, in accordance with the terms of
this Agreement. Executive, without the consent of any prior Beneficiary,
may change his designation of Beneficiary or Beneficiaries at any time or
from time to time by a submitting to Company a new designation in
writing. Notwithstanding the preceding provisions of this Section 10.5,
with respect to the Stock Ownership Program, the Company's Executive
Profit Sharing Plan or Performance Unit Plan, the term "Beneficiary"
shall have the meanings set forth therein.
10.6 Assignment; Successors. Company may not assign its rights and
obligations under this Agreement without the prior written consent of
Executive except to a successor of Company's business. This Agreement
shall be binding upon and inure to the benefit of Executive, his estate
and Beneficiaries, the Company and the successors and permitted assigns
of the Company.
10.7 Nonalienation. Except as is otherwise expressly provided herein,
benefits payable under this Agreement shall not be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind, either
voluntary or involuntary, prior to actually being received by Executive,
and any such attempt to dispose of any right to benefits payable
hereunder shall be void.
10.8 Severability. If all or any part of this Agreement is declared by
any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any portion of
this Agreement not declared to be unlawful or invalid. Any provision so
declared to be unlawful or invalid shall, if possible, be construed in a
manner which will give effect to the terms of such provision to the
fullest extent possible while remaining lawful and valid.
10.9 Amendment; Waiver. This Agreement shall not be amended or modified
except by written instrument executed by the parties. A waiver of any
term, covenant or condition contained in this Agreement shall not be
deemed a waiver of any other term, covenant or condition, and any waiver
of any default in any such term, covenant or condition shall not be
deemed a waiver of any later default thereof or of any other term,
covenant or condition.
10.10 Notices. All notices hereunder shall be in writing and delivered
by hand, by nationally-recognized delivery service that guarantees
overnight delivery, or by first-class, registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to Company, to: Minnesota Mining and Manufacturing Company
0X Xxxxxx
Xx. Xxxx, XX 00000
Attention: General Counsel
With copy to: Xxxxx X. Xxxxx
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, XX 00000
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If to Executive, to: Xxxxx XxXxxxxx
At the most recent home address on file with
the Company
With copy to: Xxxxxx Xxxxxxx
Xxxxxx Price Xxxxxxx & Kammholz
000 Xxxxx Xx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Either party may from time to time designate a new address by notice
given in accordance with this Section. Notice shall be effective when
actually received by the addressee.
10.11 Currency. All monetary amounts stated in this Agreement are
expressed in, and shall be payable in, United States dollars.
10.12 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
10.13 Entire Agreement. This Agreement forms the entire agreement
between the parties hereto with respect to any severance payment and with
respect to the subject matter contained in the Agreement and shall
supersede all prior agreements, promises and representations regarding
employment, compensation, severance or other payments contingent upon
termination of employment, whether in writing or otherwise.
10.14 Applicable Law. This Agreement shall be interpreted and construed
in accordance with the laws of the State of Delaware, without regard to
its choice of law principles.
10.15 Survival of Executive's Rights and Obligations. All of Executive's
rights hereunder, including his rights to compensation and benefits, and
his obligations under Article IX hereof, shall survive the termination of
Executive's employment and/or the termination of this Agreement.
10.16 Indemnification. Executive shall be indemnified by the Company
against liability as an officer and director of the Company and any
Subsidiary or Affiliate of the Company to the maximum extent permitted by
applicable law. The Executive's rights under this Section 10.16 shall
continue so long as Executive may be subject to such liability, whether
or not this Agreement may have terminated prior thereto.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
written below.
Minnesota Mining and Manufacturing Company
By: /s/ Xxxxxx X. Xxxxxxx
Its: Director
Date: _____________________________
EXECUTIVE
/s/ W. Xxxxx XxXxxxxx, Xx.
W. Xxxxx XxXxxxxx, Xx.
Date: _____________________________
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ATTACHMENT A
RELEASE
This RELEASE ("Release") dated as of this ____________________ day
between Minnesota Mining and Manufacturing Company, a corporation
incorporated under the laws of Delaware ("Company"), and W. Xxxxx
XxXxxxxx, Xx. ("Executive").
WHEREAS, the Company and the Executive previously entered into an
Employment Agreement dated December 4, 2000 under which Executive was
employed to serve as the Company's Chief Executive Officer;
WHEREAS, the Executive's employment with the Company (has been)
(will be) terminated effective __________________; and
WHEREAS, pursuant to Section 8.3 of the Employment Agreement,
Executive is entitled to certain compensation and benefits upon such
termination, contingent upon the execution of this Release.
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained herein and in the Employment Agreement, the Company
and Executive agree as follows:
1. Executive, on his own behalf and on behalf of his heirs, estate
and beneficiaries, does hereby release the Company, and any of its
Subsidiaries or Affiliates (as such terms are defined in the Employment
Agreement), and each past or present officer, director, agent, employee,
shareholder, and insurer of any such entities, from any and all claims
made, to be made, or which might have been made of whatever nature,
whether known or unknown, from the beginning of time, including those
that arose as a consequence of his employment by Company, or arising out
of the severance of such employment relationship, or arising out of any
act committed or omitted during or after the existence of such employment
relationship, all up through and including the date on which this Release
is executed, including, but not limited to, those which were, could have
been or could be the subject of an administrative or judicial proceeding
filed by Executive or on his behalf under federal, state or local law,
whether by statute, regulation, in contract or tort, and including, but
not limited to, every claim for front pay, back pay, wages, bonus, fringe
benefit, any form of discrimination (including but not limited to, every
claim of race, color, sex, religion, national origin, disability or age
discrimination), wrongful termination, emotional distress, pain and
suffering, breach of contract, compensatory or punitive damages,
interest, attorney's fees, reinstatement or reemployment. If any court
rules that such waiver of rights to file, or have filed on his behalf,
any administrative or judicial charges or complaints is ineffective,
Executive agrees not to seek or accept any money damages or any other
relief upon the filing of any such administrative or judicial charges or
complaints. Executive relinquishes any right to future employment by
Company and Company shall have the right to refuse to re-employ Executive
without liability. Executive acknowledges and agrees that even though
claims and facts in addition to those now known or believed by him to
exist may subsequently be discovered, it is his intention to fully settle
and release all claims he may have against the Company and the persons
and entities described above, whether known, unknown or suspected.
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2. The Company and Executive acknowledge and agree that the
release contained in Paragraph 1 does not, and shall not be construed to,
release or limit the scope of any existing obligation of Company (i) to
indemnify Executive for his acts as an officer or director of Company in
accordance with the bylaws of Company and the policies and procedures of
Company that are presently in effect including Section 10.16 of the
Employment Agreement, or (ii) to Executive and his eligible,
participating dependents or beneficiaries under any existing group
welfare or retirement plan of Company in which Executive and/or such
dependents are participants.
[Applicable Required ADEA waiver provisions to be inserted]
IN WITNESS WHEREOF, the parties have executed this Release on the
date first above written.
EXECUTIVE
__________________________________
W. Xxxxx XxXxxxxx, Xx.
Minnesota Mining and Manufacturing Company
By:
Its:
