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EXHIBIT 12
CHANGE OF CONTROL TERMINATION AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into this 13th day of
November, 1997, by and between ULTRA PAC, INC., a Minnesota corporation
("Ultra Pac"), and XXXXXXX X. XXXXX, XX., an individual residing in the State
of Florida (the "Executive").
RECITALS
A. The parties recognize that the Executive's contribution to the
growth and success of Ultra Pac has been substantial. The Board of Directors of
Ultra Pac (the "Board") desires to provide for the continued employment of the
Executive and to make certain changes in the Executive's employment
arrangements with Ultra Pac which the Board has determined will reinforce and
encourage the continued attention and dedication of the Executive as a member
of the management of Ultra Pac.
B. It is expressly recognized by the parties that the Executive's
employment with Ultra Pac and agreement to be bound by the terms of this
Agreement represent a substantial commitment to Ultra Pac in terms of the
Executive's personal and professional career and a foregoing of present and
future career options by the Executive, for all of which Ultra Pac receives
substantial value.
C. The parties recognize that a Change of Control, as defined herein,
is likely to result in material alteration or diminishment of the Executive's
position and responsibilities and substantially frustrate the purpose of the
Executive's commitment to Ultra Pac and forbearance of other career options.
D. The parties recognize that in light of the above-described
commitment and forbearance of other career options, it is essential that, for
the benefit of Ultra Pac and its stockholders, provision be made for a Change
in Control Termination, as defined herein, in order to enable the Executive to
effectively continue in the Executive's position in the face of inherently
disruptive circumstances arising from the possibility of a Change of Control of
Ultra Pac, although no such change is now contemplated or foreseen.
E. The parties have previously entered into agreements and undertakings
with respect to the Executive's employment and compensation, and the parties
wish to supplement such previous agreements and undertakings.
NOW, THEREFORE, in consideration of the foregoing recitals, the
Executive's continued employment with and by Ultra Pac, and the mutual benefits
to be gained by the performance hereof, the parties hereto agree as follows:
1.) Definitions. For purposes of this Agreement, the following
definitions shall be applied:
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(a) "Base Salary" shall mean regular cash compensation paid on a
periodic basis exclusive of benefits, bonuses or incentive payments, if any.
(b) "Board" or "Board of Directors" shall mean the board of directors of
Ultra Pac.
(c) "Change of Control" shall mean any merger, combination, sale,
transfer, exchange, reorganization, or other transaction whereby:
(1) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), entity, or group of
associated persons or entities acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac representing fifty
percent (50%) or more of the voting control of Ultra Pac's then
issued and outstanding securities, which person, entity or group is
not affiliated (within the meaning of the Securities Act of 1933)
with Ultra Pac as of the date of this Agreement; or
(2) any "person" (as such term is defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934), entity, or group of
associated persons or entities acting in concert becomes the
"beneficial owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac representing
thirty percent (30%) or more of the voting control of Ultra Pac's
then issued and outstanding securities, which person, entity or group
is not affiliated (within the meaning of the Securities Act of 1933)
with Ultra Pac as of the date of this Agreement, coupled with a
change in the composition of the Board of fifty percent (50%) or more
of the membership of the Board.
(d) "Change of Control Payments" shall mean any payment (including any
benefit or transfer of property) in the nature of compensation,
to or for the benefit of the Executive under any arrangement which is
partially or entirely contingent on a Change of Control, or is
deemed to be contingent on a change of control or ownership of Ultra
Pac for purposes of Section 280G of the Code. As used in this
definition, the term "arrangement" includes any agreement between
the Executive and Ultra Pac and any and all of Ultra Pac's salary,
bonus, incentive, compensation or benefit plans, programs or
arrangements, and shall include this Agreement.
(e) "Change of Control Termination" shall mean, with respect to the
Executive, any of the following events occurring within one (1)
year after a Change of Control.
(1) Termination of the Executive's employment by Ultra Pac or
its successors; or
(2) Termination of employment with Ultra Pac by the Executive
pursuant to Section 2. A Change of Control Termination by the
Executive shall not, however, include termination by reason of
death, disability or retirement.
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(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any reference to a section of the Code shall mean
that section of the Internal Revenue Code of 1986, as amended,
or the corresponding section of such Code as hereafter amended.
(g) "Good Reason" shall mean a good faith determination by the
Executive, in the Executive's sole and absolute judgment, that
any one or more of the following events has occurred, without
the Executive's express written consent, after a Change of
Control:
(1) A change in the Executive's reporting responsibilities,
titles or offices as in effect immediately prior to
the Change of Control, or any removal of the Executive
from, or any failure to re-elect the Executive to, any
position which has the effect of diminishing Executive's
responsibility or authority;
(2) A reduction by Ultra Pac in the Executive's Base
Salary as in effect immediately prior to the Change of
Control or as the same may be increased from time to time,
or a change in the eligibility requirements or performance
criteria under any bonus, incentive or compensation plan,
program or arrangement under which the Executive is covered
immediately prior to the Change of Control, which adversely
affects the Executive;
(3) Without replacement by a plan providing benefits to the
Executive equal to or greater than those discontinued,
the failure by Ultra Pac to continue in effect, within its
maximum stated term, any pension, bonus, incentive, stock
ownership, purchase, option, life insurance, health
insurance, accident and disability insurance, or any other
employee benefit plan, program, or arrangement in which the
Executive is participating at the time of the Change of
Control, or the taking of any action by Ultra Pac that
would adversely affect the Executive's participation or
materially reduce the Executive's benefits under any of
such plans or benefits as such participation or benefits
may exist at the time of the Change of Control;
(4) The taking of any action by Ultra Pac that would
materially adversely affect the physical conditions
existing at the time of the Change of Control in or under
which the Executive performs his or her employment duties;
(5) The failure by Ultra Pac to obtain a binding and
enforceable agreement, signed by any successor to Ultra
Pac. providing for the assumption by such successor of the
obligations of Ultra Pac under this Agreement, and the
agreement of such successor to perform all obligations of
Ultra Pac under this Agreement, or
(6) Any purported termination by Ultra Pac of this Agreement
or the employment of the Executive by Ultra Pac which is
not expressly authorized by this Agreement or any breach
of this Agreement by Ultra Pac.
3.
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2.) Chance of Control Termination Right and Compensation. For a period
of one (1) year following a Change of Control, the Executive shall have the
right, at any time and within the Executive's sole discretion, to terminate
employment with Ultra Pac for Good Reason. Such termination shall be
accomplished by, and effective upon, the Executive giving written notice to
Ultra Pac of the Executive's decision to terminate such employment. In the
event of a Change of Control Termination, and subject to the "Limitation on
Change of Control Compensation" contained in Section 3 herein, then, and
without further action by the Board or otherwise, Ultra Pac shall, within the
thirty (30) days of such termination, make a lump sum payment to the Executive
in an amount equal to two times the Executive's "annualized includible
compensation for the base period," as defined in Section 280G(d)(l) of the
Code.
3.) Limitation on Change of Control Compensation. In the event that the
Executive is a "disqualified individual" within the meaning of Section 280G of
the Code, the parties hereto expressly agree that the payments described in
Section 2 above shall be considered together with all other Change of Control
Payments so that, with respect to the Executive, all Change of Control Patents
are collectively subject to an overall maximum limit. Such maximum limit shall
be One Dollar ($1.00) less than the largest amount under which no portion of
the Change of Control Payments is considered a "parachute payment" within the
meaning of Section 280G of the Code. Accordingly, to the extent that the Change
of Control Payments would be considered a "parachute payment" with respect to
the Executive, the portions of such Change of Control Payments shall be reduced
or eliminated in the following order until the remaining Change of Control
Payments with respect to the Executive is One Dollar ($1.00) less than the
maximum allowable which would not be considered a "parachute payment" under
Section 280G of the Code:
(a) First, any cash payment to the Executive;
(b) Second, any Change of Control Payments not described herein; and
(c) Third, any forgiveness of indebtedness of the Executive to Ultra Pac.
The Executive expressly and irrevocably waives any and all rights to
receive any Change of Control Payments which would be considered a
"parachute payment" under the Code.
4.) Attorneys' Fees. In the event the Executive incurs any legal
expense to enforce or defend his or her rights under this Agreement, or to
recover damages for breach thereof, the Executive shall be entitled to recover
from Ultra Pac any actual expenses for attorneys' fees and disbursements
incurred.
5.) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of Ultra Pac, whether by way
of merger, consolidation, operation of law, assignment, purchase or other
acquisition of substantially all of the assets or business of Ultra Pac, and
any such successors or assigns shall absolutely and unconditionally assume all
of Ultra Pac's obligations hereunder.
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6.) Notices. All notices, requests and demands given to or made
pursuant hereto shall, except as otherwise specified herein, be in writing and
be delivered personally or mailed by certified mail, return receipt requested,
to any such party at its address which:
(a) In the case of Ultra Pac shall be:
Ultra Pac. Inc.
00000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxx, Xxxxxxxxx 00000
With a copy to:
Larkin, Hoffman, Xxxx & Xxxxxxxx, Ltd.
1500 Norwest Financial Center
0000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
(b) In the case of the Executive shall be:
Xxxxxxx X. Xxxxx, Xx.
0000 Xxxxx Xxxxx Xxxxx,
Xxx. 000
Xxxxxxxxx, XX 00000
Either party may, by notice hereunder, designate a changed address. Any
notice, if delivered or mailed properly, shall be deemed dispatched on the
registered date or that stamped on the certified mail receipt, and shall be
deemed received within the second business day thereafter or when it is
actually received, whichever is sooner.
7.) Captions. The various headings or captions in this Agreement are
for convenience only and shall not affect the meaning or interpretation of this
Agreement.
8.) Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota, and any and
every legal proceeding arising out of or in connection with this Agreement
shall be brought in the appropriate courts of the State of Minnesota. Each of
the parties hereby consenting to the exclusive jurisdiction of said courts for
this purpose.
9.) Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.) Waivers. No failure on the part of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single
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or partial exercise of any right or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right or remedy
granted hereby or by any related document or by law.
11.) Modification. This Agreement may not be and shall not be modified
or amended except by written instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EXECUTIVE ULTRA PAC, INC.
/s/ Xxxxxxx X. Xxxxx, Xx. By: /s/ Xxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx, Xx. Xxxxxx X. Xxxxx
Its: President
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