EXHIBIT 10.27
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made as of October 29, 2002 (the "Effective Date") between
CNS, INC. a Delaware corporation ("CNS") and Xxxxx Xxxxxxxxx ("Employee").
WHEREAS, CNS considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best interests of CNS
and its shareholders; and
WHEREAS, Employee has made and is expected to continue to make, due to his
experience and knowledge, a significant contribution to the profitability,
growth and financial strength of CNS; and
WHEREAS, CNS, as a publicly held corporation, recognizes that the possibility of
a change in control may exist and that such possibility and the uncertainty and
questions which it may raise among management may result in the departure or
distraction of the performance of Employee's duties to the detriment of CNS and
its shareholders; and
WHEREAS, Employee is willing to continue his employment with CNS upon the
understanding that CNS will provide income security if Employee's employment is
terminated under certain terms and conditions;
WHEREAS, it is in the best interests of CNS and its stockholders to employ
Employee and to reinforce and encourage his continued attention and dedication
to his assigned duties without distraction and to ensure his continued
availability to CNS in the event of a Change in Control; and
WHEREAS, it is further in CNS's best interests to receive certain assurances
from Employee regarding CNS's confidentiality, competition and other proprietary
business concerns;
THEREFORE, in consideration of the foregoing and of this agreement, certain
change in control protection, continued employment and other benefits hereunder,
as well as other mutual covenants and obligations hereinafter set forth, CNS and
Employee agree as follows:
1. Employment. CNS agrees to continue to employ Employee as its Vice
President, New Business Development under the terms, conditions and
benefits set forth herein and Employee accepts continued employment with
CNS on said terms, conditions and benefits.
2. Term. The term of Employee's employment shall continue until terminated
pursuant to paragraph 6, 7, or 8 herein.
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 2
3. Duties. In his position as Vice President, New Business Development,
Employee will continue to faithfully and diligently perform such executive
management responsibilities as may be assigned to him from time to time by
the Chief Executive Officer, President or Chairman of the Board of
Directors of CNS (the "Board"); devote his full time, energy and skill to
CNS's business, as is reasonably necessary to execute fully his duties
hereunder, except for vacations, absences made necessary because of
illness, and service on other corporate, civic, or charitable boards or
committees not significantly interfering with his duties hereunder; and
promote CNS's best interests. The principal place of employment and the
location of Employee's principal office and normal place of work shall be
in the Minneapolis, Minnesota metropolitan area. Employee will be expected
to travel to other locations, as necessary, in the performance of his
duties during the term of this Agreement. Employee shall notify the
President of any other paid position which he is considering accepting,
including but not limited to a board of directors position, a position as
an employee or an independent consultant, or any position, whether or not
for pay, which could constitute a conflict of interest with CNS. The
Employee agrees not to accept any such position without the President of
CNS's prior approval.
4. Compensation. For all services rendered by Employee, CNS shall pay Employee
the compensation described in Exhibit A, payable at such times as salaried
employees of CNS are customarily paid. The President of CNS shall, from
time to time during Employee's employment, review his annual salary in
connection with possible increases, giving consideration to inflation
factors, performance of Employee and CNS, salaries paid for positions of
similar responsibility for other companies, and other relevant factors, and
shall provide for such increases when deemed appropriate. Employee shall in
addition be eligible to participate in the annual management incentive
bonus program, as approved by the Board of Directors. In the event of
termination of this Agreement by CNS without Good Cause, as defined in
paragraph 7 herein, the Board may, in good faith and in its sole
discretion, determine and cause to be paid a partial bonus based on
Employee's performance through the date of termination, and such
determination shall be final and binding.
5. Benefits. Employee shall be entitled to Paid Time Off consistent with CNS
policy and such insurance, 401(k) program and other benefits available to
all salaried employees of CNS, subject to any limitations on such benefits
to officers, directors or highly paid employees in order that such benefit
programs qualify under federal or state law for favored tax or other
treatment. Such benefit programs may be changed from time to time by the
Board. Employee shall also be entitled to reimbursement of his reasonable
and necessary expenses incurred in connection with the performance of his
duties hereunder.
6. Termination by Employee. Employee may resign his employment with CNS
effective upon 30 days' advance written notice to the President. If
Employee resigns under this paragraph, the President retains the right to
terminate his employment, effective upon written notice to Employee, at any
time during the 30-day notice period, provided, however, that base salary
and the employer portion of his health insurance premiums will continue to
be paid by CNS for the duration of the 30-day notice period. In connection
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 3
with his termination, Employee will receive any accrued unused Paid Time
Off to which he is entitled.
7. Termination by CNS. CNS shall have the right to terminate Employee's
employment in any of the following ways:
a. CNS may, by written notice to Employee, terminate his employment
without Good Cause, in which event Employee will be paid his base
salary up to the date of termination. Employee is also entitled to
receive Salary Continuation for one year from his termination date.
"Salary Continuation" shall mean payment by CNS of the Employee's base
salary as of his termination date, payable to Employee on the same
schedule and in the same amount as the payment of base salary prior to
termination of his employment, until such time as the full Salary
Continuation obligation shall be discharged, as provided in this
paragraph 7. During the period when Salary Continuation is payable to
Employee, CNS will also continue to provide to Employee all group
medical, dental and life plan benefits provided to its other senior
executives. Employee shall also receive any accrued unused Paid Time
Off to which he is entitled. Receipt of Salary Continuation is subject
to Employee's compliance with his obligations under paragraphs 9, 10,
11 and 12 of this Agreement and his execution of a standard release
agreement which includes, in addition to release of claims against CNS
and related releasees, an obligation not to speak negatively about or
harm CNS, confidentiality with respect to the termination process, and
cooperation with the transition of responsibilities. Payment of the
employer portion of Employee's group medical, dental and life plan
premiums under this paragraph and under paragraphs 6 and 8 herein
shall cease as of the date on which Employee is covered under other
such group plans if such coverage occurs prior to termination of any
salary continuation periods set forth in said paragraphs.
b. CNS, by written notice to Employee, may terminate his employment for
Good Cause, as defined below. In the event of termination under this
subparagraph 7.b., Employee shall be paid his base salary up to the
date of termination. "Good Cause" for the purpose of this Agreement
shall mean one or more of the following: (i) willful and premeditated
failure or refusal of Employee to render services to CNS in accordance
with his obligations under paragraph 3; (ii) the commission by
Employee of an act of fraud or embezzlement against CNS; (iii) the
commission by Employee of any other willful or reckless act which
injures CNS in a substantial or material way (it being understood that
mere negligence in performance of duties is not Good Cause under this
Agreement); (iv) the breach by Employee of any provision of this
Agreement; or (v) the commission of a substantial act of moral
turpitude by Employee which is deemed by CNS's Board to have a
material adverse effect on CNS; or (vi) unsatisfactory performance
after specific notice of performance deficiencies, description of
expectations and opportunity to cure.
EXECUTIVE EMPLOYMENT AGREEMENT
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c. CNS, by written notice to Employee, may terminate Employee's
employment under this Agreement if he becomes physically or mentally
disabled during the term so that he has not been able to substantially
perform, for a period of 120 consecutive days, with reasonable
accommodation, the usual duties assigned to him hereunder
("Disability"). Upon such determination, CNS shall pay to Employee his
base salary up to the date of such termination to the extent not
covered by any disability plan.
d. This Agreement shall terminate upon the Employee's death during its
term, except that CNS shall pay to the legal representative of
Employee's estate all base salary due him up to the date of his death.
8. Termination Following a Change in Control.
DEFINITION.
a. For purposes of this Agreement, "Change in Control" shall mean the
occurrence of one of the following events:
i. ACQUISITION OF 25% OF STOCK IN CNS
any "person" [as such term is used in Section 13(d) and 4(d) of
the Securities Exchange Act of 1934, as amended ("Exchange
Act")], other than a trustee or other fiduciary holding
securities under an employee benefit plan of CNS is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly of securities representing
25% or more of the combined voting power of CNS's then
outstanding securities;
ii. CHANGE IN 50% OF BOARD DIRECTORS WHO WERE NOT APPROVED BY BOARD
during any period of two consecutive years (not including any
period ending prior to the effective date of this Agreement),
individuals who at the beginning of such period constitute the
Board of Directors of CNS, and any new director [other than a
director designated by a person who has entered into agreement
with CNS to effect a transaction permitted by Section 6(a)(I),
(iii) or (iv)] whose election by the Board of Directors of CNS or
nomination for election by CNS's stockholders was approved by
vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved
("Continuing Directors"), cease for any reason to constitute at
least a majority of the Board of Directors of CNS;
iii. MERGER OR CONSOLIDATION WHERE CNS SHAREHOLDERS OWN LESS THAN 50%
OF SURVIVING COMPANY'S STOCK
the stockholders of CNS approve a merger or consolidation of CNS
with
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 3
any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of CNS outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the merged or consolidated entity) 50% or more of
the combined voting power of the voting securities of CNS or such
merged or consolidated entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of CNS or similar
transaction in which no "person" acquires more than 25% of the
combined voting power of CNS's then outstanding securities;
iv. SALE OF CNS ASSETS FOR VALUE TOTALING 50% OR MORE OF CNS STOCK
MARKET VALUE
the stockholders of CNS approve a plan of complete liquidation or
a sale or disposition by CNS of all or substantially all of CNS's
assets. "The sale or disposition by CNS of all or substantially
all of CNS's assets" shall mean a sale or other disposition
transaction or series of related transactions involving assets of
CNS or of any direct or indirect subsidiary of CNS (including the
stock of any direct or indirect subsidiary of CNS) in which the
value of the assets or stock being sold or otherwise disposed of
(as measured by the purchase price being paid therefor or by such
other method as the Board of Directors of CNS determines is
appropriate in a case where there is no readily ascertainable
purchase price) constitutes more than 50% of the fair market
value of CNS. For purposes of the preceding sentence, the "fair
market value of CNS" shall be the aggregate market value of CNS's
outstanding common stock (on a fully diluted basis) plus the
aggregate market value of CNS's other outstanding equity
securities. The aggregate market value of CNS's common stock
shall be determined by multiplying the number of shares of CNS
common stock (on a fully diluted basis) outstanding on the date
of the execution and delivery of a definitive agreement
("Transaction Date") with respect to the sale or disposition by
CNS of all or substantially all of CNS's assets by the average
closing price for CNS's common stock for the ten trading days
immediately preceding the Transaction Date. The aggregate market
value of any other equity securities of CNS shall be determined
in a manner similar to that prescribed in the immediately
preceding sentence for determining the aggregate market value of
CNS's common stock or by such other method as the Board of
Directors of CNS shall determine is appropriate; and
Employee agrees that, subject to the terms and conditions of this
Agreement, in the event of a Change in Control of CNS occurring after
the date hereof, Employee will remain in the employ of CNS for a
period of 30 days from the occurrence of such Change in Control.
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 6
b. Applicability. In the event of a Change in Control, the terms of this
subparagraph 8.b shall be effective for a period of 24 months
following the Change in Control. At the expiration of such 24 month
period this Agreement in its entirety shall be terminated and be of no
further effect. Employee shall be entitled to receive the benefits set
forth in subparagraph 8.f if, within 24 months of such Change in
Control, his employment is terminated by CNS or its successor without
Good Cause (as defined in paragraph 7.a above), or by Employee for
Good Reason (as defined in subparagraph 8.b.i, below). Employee shall,
in return for the benefits provided under subparagraph 8.f., sign a
standard release agreement with CNS, in which he agrees to release any
and all claims and causes of action which he might have against CNS
and in which he affirms and acknowledges his obligations under
paragraphs 9, 10, 11 and 12 of this Agreement.
i. Termination for Good Reason shall be effective immediately upon
written notice from the Employee to the President. Good Reason
shall exist if CNS has materially breached any of the terms of
this Agreement; Employee is assigned duties which are materially
inconsistent with his position, duties, responsibilities and
status as Vice President, New Business Development; his
compensation, including any incentive compensation or bonus plan,
is reduced; or relocation of CNS would require him to relocate
his principal residence outside reasonable commuting distance of
the Twin Cities Metropolitan area.
ii. Termination without Good Cause shall be effective upon 30 days'
advance notice by CNS to the Employee. For purposes of this
paragraph 8, Good Cause shall be defined as in subparagraph 7.b.
c. Notice of Termination. Any purported termination of employment under
this paragraph 8 and also under paragraphs 6 and 7 shall be
communicated by written Notice of Termination to the other party
hereto in accordance with paragraph 20 hereunder. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
indicates the specific termination provision in this Agreement relied
upon and which sets forth the facts and circumstances claimed to
provide a basis for termination of Employee's employment.
d. Date of Termination. For purposes of this paragraph 8 and also
paragraphs 6 and 7 of this Agreement, "Date of Termination" shall
mean:
i. if Employee's employment is terminated for Disability, as defined
in paragraph 7.c. hereunder, 30 days after Notice of Termination
is given (provided that Employee shall not have returned to the
full-time performance of Employee's duties during such 30 day
period); and
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 7
ii. if Employee's employment is terminated pursuant to a provision
contained in paragraph 6, 7 or 8 herein or for any other reason
(other than Disability), the date specified in the Notice of
Termination, consistent with the provisions in said paragraphs.
e. Dispute of Termination. If, within ten days after any Notice of
Termination is given under this paragraph 8, the party receiving such
Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date
on which the dispute is finally determined, either by mutual written
agreement of the parties, or by a final judgment, order or decree of a
court of competent jurisdiction (which is not appealable or the time
for appeal therefrom having expired and no appeal having been
perfected); provided, that the Date of Termination shall be extended
by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such
dispute, CNS shall continue to pay Employee full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, base salary) and continue Employee as
a participant in all compensation, benefit and insurance plans in
which Employee was participating when the notice giving rise to the
dispute was given, to the extent permissible under the terms of the
applicable group plans and state and federal law, until the dispute is
finally resolved in accordance with this subparagraph. Amounts paid
under this subsection are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other
amounts under this Agreement.
f. Compensation Upon Termination. Following a Change in Control, as
defined in subparagraph 8.a. above, to the extent provided in
subparagraph 8.b. above, Employee shall be entitled to the following
benefits in lieu of any benefits which would otherwise be available to
him upon termination under paragraphs 6 or 7 hereunder:
i. CNS shall pay Employee through the Date of Termination Employee's
base salary at the rate in effect at the time the Notice of
Termination is given and any other form or type of other
compensation otherwise payable for such period, including any
applicable incentive bonus, commensurate with his performance and
the performance of CNS.
ii. In lieu of any further salary payments for periods subsequent to
the Date of Termination, CNS shall pay a severance payment (the
"Severance Payment") equal to 24 months of Employee's
Compensation as defined below based on the average monthly
Compensation paid to Employee during the 24 month period ending
immediately prior to the Date of Termination (without giving
effect to any reduction in such Compensation which would
constitute a breach of this Agreement). If the Employee has not
been employed by CNS for 24 months as of the Date of Termination,
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 8
average monthly Compensation shall be the Employee's average
monthly Compensation for the number of months during which the
Employee has been employed at CNS. For purposes of this
subparagraph, Compensation shall mean and include every type and
form of compensation paid to Employee by CNS (or any corporation
("Affiliate") affiliated with CNS within the meaning of Section
1504 of the Internal Revenue Code of 1986, as may be amended from
time to time (the "Code")) and included in Employee's gross
income for federal income tax purposes, but excluding
compensation income arising from (1) hiring bonuses and (2)
compensation income recognized as a result of the exercise of
stock options or sale of the stock so acquired. All of Employee's
contributions to any qualified plan pursuant to Section 401(k) of
the Code or any flexible benefit plan pursuant to Section 125 of
the Code shall be deemed to be included in gross income for
federal tax purposes for purposes of this subparagraph. The
Severance Payment shall be made in a single lump sum within 60
days after the Date of Termination.
iii. For 18 months following the Employee's Date of Termination, CNS
shall arrange to provide, at its sole expense, Employee with
group medical, dental and life plan benefits substantially
similar to those which Employee was receiving or entitled to
receive immediately prior to the Notice of Termination. The cost
of providing such benefits shall be in addition to (and shall not
reduce) the Severance Payment. Benefits otherwise receivable by
Employee pursuant to this paragraph (iii) shall be reduced to the
extent comparable benefits are actually received by Employee
during such period from any third party, and any such benefits
actually received by Employee shall be reported to CNS.
iv. CNS shall also pay to Employee all legal fees and expenses
incurred by Employee as a result of such termination (including
all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
any right or benefit provided by this paragraph).
v. The Severance Payment shall be reduced and offset by the amount
of any other payment received or to be received by Employee in
connection with his termination of employment pursuant to any
policies of CNS.
vi. If a determination is made by legislation, regulations, rulings
directed to CNS or Employee, or court decision that the aggregate
amount of any payment made to Employee hereunder, or pursuant to
any plan, program or policy of CNS in connection with, on account
of, or as a result of, a Change of Control constitutes an "excess
parachute payment" as defined in Section 280G of the Code subject
to the excise tax provisions of Section 4999 of the Code, or any
successor sections thereof, Employee shall be
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 9
entitled to receive from CNS, in addition to any other amounts
payable hereunder, an amount which shall be equal to such excise
tax, plus, on a net after-tax basis, an amount equal to the
aggregate amount of any interest, penalties, fines or additions
to any tax, including income tax, which are imposed in connection
with the imposition of such excise tax. Such amount shall be
payable to Employee as soon as may be practicable after such
final determination is made. Employee and CNS shall mutually and
reasonably determine whether or not such determination has
occurred or whether any appeal to such determination should be
made.
vii. Employee shall be entitled to receive all benefits payable to
Employee under the CNS, Inc. Profit Sharing Plan and Trust or any
successor of such Plan and Trust and any other plan or agreement
relating to retirement benefits, and, in addition, if Employee is
not fully vested in his account balance under such Plan, a single
lump sum payment in cash from CNS representing the nonvested
portion of his account, which shall be in addition to, and not
reduced by, any other amounts payable to Employee under this
paragraph 8.
viii. Employee shall not be required to mitigate the amount of any
payment provided for in this paragraph 8 by seeking other
employment or otherwise, nor shall the amount of any payment or
benefit provided for in this paragraph 8 be reduced by any
compensation earned by Employee as the result of employment by
another employer or by retirement benefits after the Date of
Termination, or otherwise except as specifically provided in this
paragraph 8.
ix. In order to assure the performance of CNS or its successor of its
obligations under this paragraph, CNS may deposit in trust an
amount equal to the maximum payment that will be due Employee
under the terms hereof. Under a written trust instrument, the
Trustee shall be instructed to pay to Employee (or Employee's
legal representative, as the case may be) the amount to which
Employee shall be entitled under the terms hereof, and the
balance, if any, of the trust not so paid or reserved for payment
shall be repaid to CNS. If CNS deposits funds in trust, payment
shall be made no later than the occurrence of a Change in
Control. If and to the extent there are not amounts in trust
sufficient to pay Employee under this Agreement, CNS shall remain
liable for any and all payments due to Employee. In accordance
with the terms of such trust, at all times during the term of
this Agreement, Employee shall have no rights, other than as an
unsecured general creditor of CNS, to any amounts held in trust
and all trust assets shall be general assets of CNS and subject
to the claims of creditors of CNS. Failure of CNS to establish or
fully fund such trust shall not be deemed a revocation or
termination of this Agreement by CNS.
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 10
x. As a condition of receiving the Severance Payment and other
benefits provided in this subparagraph 8.f and in subparagraph
8.g, Employee shall be required to sign a standard release
agreement with CNS in which he agrees to release any and all
claims and causes of action which he might have against CNS and
in which he affirms and acknowledges his obligations under
paragraphs 9, 10, 11 and 12 of this Agreement.
g. Stock Options. Employee shall, immediately upon a Change in Control,
vest in all stock options which have been granted to him and he shall
be entitled to exercise all rights and to receive all benefits
accruing to him under any and all CNS stock purchase and stock option
plans or programs, including the CNS, Inc. 1994 Amended Stock Plan, or
any successor to any such plan or program, which shall be in addition
to and not reduced by any other amounts payable to Employee under this
paragraph 8.
9. Confidential Information. All knowledge and information not already
available to the public which Employee may acquire or has acquired with
respect to product development, improvements, modifications, discoveries,
designs, methods, systems, computer software, programs, codes and
documentation, research, designs, formulas, instructions, methods,
inventions, trade secrets, services or other private or confidential
matters of CNS (such as those concerning sales, costs, profits,
organizations, customer lists, pricing methods, etc.), or of any third
party which CNS is obligated to keep confidential, shall be regarded by
Employee as strictly confidential and shall not be used by Employee
directly or indirectly or disclosed to any persons, corporations or firms.
All of the foregoing knowledge and information are collectively termed
"Confidential Information" herein. Employee's obligations under this
paragraph will not apply to any information which (a) is or becomes known
to the general public under circumstances involving no breach by Employee
of the terms of this paragraph, (b) is generally disclosed to third parties
by CNS as a continuing practice without restriction on such third parties,
(c) is approved for release by written authorization of CNS's Board, or (d)
Employee is obligated by law to disclose.
10. Disclosure and Transfer of Product Developments, etc.
a. Employee will make full and prompt disclosure to CNS or all product
developments, improvements, modifications, discoveries, computer
software, programs, codes and documentation, research, designs,
formulas, configurations, instructions, methods and inventions (all of
which are collectively termed "Developments" herein), whether
patentable or not, made, discovered, conceived or first reduced to
practice by Employee or under his direction during his employment,
alone or with others, whether or not made or conceived during normal
working hours or on the premises of CNS which relate in any material
way to the business or to research or development work of CNS.
Employee confirms by his acceptance of this Agreement that CNS owns
and shall own all of the Developments.
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 11
b. Employee also agrees on behalf of himself and his heirs and legal
representatives that he will promptly communicate, disclose and
transfer to CNS, free of encumbrances and restrictions, all of his
right, title and interest in the Developments covered by subparagraph
10.a. and any patents or patent applications covering such
Developments and to execute and deliver such assignments, patents and
applications, and any other documents as CNS may direct, and to
cooperate fully with CNS to enable it to secure any patents or
otherwise protect such Developments in any and all countries. Employee
shall assign to CNS any and all copyrights and reproduction rights to
all material prepared by Employee in connection with his employment.
c. Notwithstanding subparagraphs 10.a. and b., however, this paragraph 10
shall not apply to Developments for which no equipment, supplies,
facility or trade secret information of CNS was used and which was
developed entirely on the Employee's own time, and (1) which do not
relate (a) directly to the business of CNS or (b) to CNS's actual or
demonstrably anticipated research or development, or (2) which does
not result from any work performed by Employee for CNS.
This will confirm that Employee's obligations to CNS under paragraphs 9, 10
and 11 will continue after the termination of Employee's employment.
11. Non-Competition. During the term of Employee's employment by CNS and for
twelve (12) months thereafter, Employee shall not directly or indirectly
engage in, enter into or participate in the business of CNS or in any
business or commercial activity which does or is reasonably likely to
compete with or adversely affect the Business or products of CNS, either as
an individual for Employee's own account, as a partner or a joint venturer,
or as an officer, director, consultant or holder of more than five percent
(5%) of the entity interest in, any other person, firm, partnership or
corporation, or an employee, agent or salesman for any person. In addition,
during such period Employee shall not: avail himself of any advantages or
acquaintances he has made with any person who has, within the twelve (12)
month period ended on the date of termination of his employment, been a
customer of CNS or its affiliates, and which would, directly or indirectly,
materially divert business from or materially and adversely affect the
Business of CNS; interfere with the contractual relations between CNS and
any of its employees; or employ or cause to be employed in any capacity or
retain or cause to be retained as a consultant any person who was employed
in any capacity by CNS during the twelve (12) month period ended on the
date of termination of Employee's employment.
For purposes of this Agreement, the "Business of CNS" or "Business" means
and includes the business of the manufacture, production, sale, marketing
and distribution of the Breathe Right strip and any other products
currently offered or currently under development by CNS or offered or
currently under development by CNS during one (1) year prior to the date of
termination of Employee's employment.
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 12
Inasmuch as the activities of CNS are conducted on an international basis,
the restrictions of this paragraph 11 shall apply throughout the United
States, Canada, Japan and Europe.
12. Non-Solicitation. During the term of Employee's employment by CNS and for
twelve (12) months thereafter, Employee shall not directly or indirectly
solicit any current or prospective CNS customer, broker, vendor or
distributor for the purpose of providing products or services for or on
behalf of said customer, broker, vendor or distributor which are
competitive with the products or services being provided by CNS, which are
in the development stages of being competitive with the products or
services being provided by CNS, or which would in any way cause said
customer, broker, vendor or distributor to discontinue or reduce its
business relationship with CNS. Current CNS customers, brokers, vendors or
distributors include those customer, brokers, vendors or distributors with
whom CNS has had a business relationship at any time within one year
immediately preceding Employee's termination date. Prospective CNS
customers, brokers, vendors and distributors include those with whom (a) a
CNS representative has been in direct personal contact and (b) CNS has a
reasonable opportunity of entering into a business relationship within six
months following Employee's termination date. Employee also agrees that
during his employment in the one year period following his employment, he
will not directly or indirectly solicit any CNS employees to terminate his
or her employment with CNS. This Employee non-solicitation obligation
applies to Employees of CNS during Employee's employment and as of his
termination date.
13. Remedies. Employee acknowledges that the restrictions set forth in
paragraphs 9, 10, 11 and 12 hereof are reasonably necessary to protect
legitimate business interests of CNS. It is understood that if Employee
violates his obligations under any of these paragraphs, CNS would suffer
irreparable harm for which a recovery of money damages would be an
incomplete and inadequate remedy. It is therefore agreed that CNS, in
addition to any remedies at law, shall be entitled, as a matter of right,
in any court of competent jurisdiction, to a mandatory injunction
restraining Employee pending litigation, as well as upon final
determination thereof, from violating this Agreement. In addition, CNS will
discontinue payment to Employee of any Severance or Salary Continuation
Payments, benefits or bonus which he may be entitled to receive or is
receiving under paragraphs 6, 7 or 8 hereunder or otherwise, in the event
of his violation of any of his obligations under this Agreement. In the
event of cessation of payments and benefits, Employee's release of his
claims against CNS shall remain valid and fully enforceable in
consideration of the benefits which Employee received prior to set breach.
14. Severability. The parties intend that the covenants and agreements
contained herein shall be deemed to be a series of separate covenants and
agreements, one for each and every state of the United States and political
subdivision outside the United States where the business described is
conducted. If, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants deemed included in such action, then such
unenforceable covenants shall be deemed eliminated from the provisions of
this Agreement for the purpose of such proceeding to the extent necessary
to permit the remaining covenants to be enforced in such proceeding.
Further, in the event that any
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 13
provision is held to be overbroad as written, such provision shall be
deemed amended to narrow its application to the extent necessary to make
the provision enforceable according to applicable law and enforced as
amended
15. Binding Effect.
a. CNS will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets as defined in subparagraph 8.a of
CNS to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that CNS would be required to
perform it if no such succession had taken place, in which case, the
term "CNS" as used in this Agreement shall instead refer to CNS'
successor. Failure of CNS to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Employee to compensation from CNS in
the same amount and on the same terms as he would be entitled
hereunder if he terminated his employment for Good Reason following a
Change in Control, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective
shall be deemed the Date of Termination.
b. This Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, successors, heirs, and
designated beneficiaries. If Employee should die while any amount
would still be payable to Employee hereunder if Employee had continued
to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's
designated beneficiaries, or, if there is no such designated
beneficiary, to Employee's estate.
16. Entire Agreement. From and after the date of this Agreement the terms and
provisions of this Agreement constitute the entire agreement between the
parties and this Agreement supersedes any previous oral or written
communications, representations, or agreements with respect to any subject,
including the subject matter of compensation, bonus, participation and
profit sharing and termination compensation.
17. Waiver and Interpretation. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by the breaching party. No
waiver shall be valid unless in writing and signed by the party providing
such waiver. If any provision of this Agreement is held by any court to be
unenforceable, then such provision shall be deemed to be eliminated from
the Agreement to permit enforceability of the remaining provisions. If any
provision is held to be overbroad, such provision shall be amended to
narrow its application to the extent necessary for enforceability. For
purposes of the release agreement which Employee shall be required to
execute as a condition of receiving any payments and benefits hereunder,
"CNS", as referred to in this Agreement, shall include CNS and all its
EXECUTIVE EMPLOYMENT AGREEMENT
PAGE 14
affiliates, shareholders, officers, directors, employees, agents,
attorneys, insurers and indemnitors.
18. Applicable Law. All questions pertaining to the validity, construction,
execution and performance of this Agreement shall be construed and governed
in accordance with the laws of the State of Minnesota. The parties consent
to the personal jurisdiction of the State of Minnesota, waive any argument
that such a forum is not convenient, and agree that any litigation relating
to this Agreement shall be venued in Minneapolis, Minnesota.
19. Tax Withholding. CNS may withhold from any payment of benefits under this
Agreement (and forward to the appropriate taxing authority) any taxes
required to be withheld under applicable law.
20. Notice. Any notice required or desired to be given under this Agreement
shall be deemed given if in writing sent by certified mail to his residence
in the case of Employee, or to its principal office in the case of CNS.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first set forth above.
CNS, INC.
By /s/ Xxxxx Xxxxxxx
--------------------------------------
Xxxxx Xxxxxxx
Its President & CEO
EMPLOYEE
/s/ Xxxxx Xxxxxxxxx
----------------------------------------
Xxxxx Xxxxxxxxx
EXECUTIVE EMPLOYMENT AGREEMENT
EXHIBIT A
NAME: Xxxxx Xxxxxxxxx
DATE: October 29, 2002
POSITION: Vice President, New Business Development
DEPARTMENT: New Business Development
BASE SALARY: $175,000
MANAGEMENT INCENTIVE PLAN LEVEL: 15% at Threshold
30% at Plan
60% at Maximum
