EXHIBIT 10
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated March 31, 1998, is by and between
Dain Rauscher Incorporated, a Minnesota corporation (the
"Company"), and Kenneth J. Wessels, an individual resident of the
State of Minnesota ("Executive").
WHEREAS, Executive has heretofore been employed as a
senior executive officer of Wessels, Arnold & Henderson Group,
L.L.C., a Delaware limited liability company ("WAHG"), and
Wessels, Arnold & Henderson, L.L.C., a Delaware limited liability
company ("WAH" and, together with "WAHG", the "Wessels Group"),
has been a managing director of WAHG and WAH and is knowledgeable
about and experienced in the management and affairs of the
Wessels Group;
WHEREAS, the Company has agreed to acquire the Wessels
Group pursuant to an Agreement and Plan of Merger dated February
8, 1998 (the "Merger Agreement"), by and among the Wessels Group,
the Company and Dain Rauscher Corporation, a Delaware corporation
and sole stockholder of the Company ("Parent"), which provides
for the merger of the Wessels Group with an acquisition
subsidiary of the Company (the "Merger");
WHEREAS, Executive is also an owner of the Wessels
Group who intends to sell his interests in the Wessels Group in
the Merger;
WHEREAS, Parent and the Company have conditioned the
consummation of the Merger on, among other things, the
effectiveness of this Agreement; and
WHEREAS, the Company desires to retain the services of
Executive subsequent to the consummation of the Merger, and
Executive desires to be employed by the Company, on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the respective
covenants and commitments of the Company and Executive set forth
below, and as an inducement to Parent and the Company to
consummate the Merger, Executive hereby agrees as follows:
1. Employment. The Company hereby agrees to employ
Executive, and Executive hereby accepts such employment and
agrees to perform services for the Company on and after the
Effective Date of the Merger, upon the other terms and conditions
set forth in this Agreement.
2. Term. Unless otherwise determined in accordance with
the provisions of this Agreement, the term of Executive's
employment hereunder shall commence on the date of the occurrence
of, and as of the time immediately after, the consummation of the
Merger (the "Effective Date"), and shall extend for a continuous
period ending on December 31, 1999. Such period shall be
extended automatically for one additional year unless either
party delivers written notice to the other party on or before
October 31, 1999 of such notifying party's determination not to
continue Executive's employment hereunder. The term of
Executive's employment hereunder is referred to herein as the
"Term."
3. Position and Duties.
3.01 Service with the Company. During the term,
Executive shall have the title of Senior Executive Vice President
of the Company, or an equivalent title to that held by the most
senior officers responsible for managing the Private Client Group
and the Fixed Income Group of the Company. In such capacity,
Executive shall manage the Company's Equity Capital Markets
Group. During the Term, Executive shall report directly to the
Chairman and Chief Executive Officer of the Company or, if one is
named, the President and Chief Operating Officer of the Company.
In addition, during the Term, Executive shall also have
the title of Senior Executive Vice President of Parent.
3.02 Performance of Duties. Executive agrees to serve
the Company faithfully and to the best of his ability and to
devote his full time, attention and efforts to the business and
affairs of the Company during the Term. Executive hereby
confirms that he is under no contractual commitments inconsistent
with his obligations set forth in this Agreement and that, during
the Term, he will not render or perform any services for any
other corporation, firm, entity or person which are inconsistent
with the provisions of this Agreement or which would otherwise
impair his ability to perform his duties hereunder.
3.03 Board Seat. During the Term, the Company shall
appoint Executive to be a member of the Company's Board of
Directors. During the Term, Parent agrees to vote its shares of
the Company's common stock in favor of Executive's election to
the Board of Directors of the Company, and to nominate or cause
the appointment of Executive for election to the Board of
Directors of Parent and use its best efforts to solicit and
obtain such election or appointment.
4. Compensation.
4.01 Base Salary. Subject to the terms and conditions
of this Agreement, as base compensation for all services to be
rendered by Executive under this Agreement during the Term, the
Company shall pay Executive an annualized base salary of no less
than $300,000 (the "Base Salary"), payable in accordance with the
Company payroll policy as in effect from time to time (currently
on a twice-per-month installment basis).
4.02 Incentive Compensation. In addition to the
Guarantee (as defined in Section 4.03 hereof), and also subject
to the terms and conditions of this Agreement, the Company shall
pay Executive an annual incentive bonus during the Term in
accordance with the terms set forth in Exhibit A hereto (the
"Formula Bonus").
4.03 Guaranteed Cash Compensation; Mandatory Deferral.
During each full calendar year of the Term (and for the 9-month
period ending December 31, 1998), Executive's total cash
compensation, exclusive of the Formula Bonus, shall not be less
than $1,500,000 on an annualized basis (the "Guarantee").
Executive shall annually defer 30% of such compensation,
exclusive of the Formula Bonus, into Parent's Executive Deferred
Compensation Plan.
4.04 Stock Options. Upon commencement of the Term,
Parent shall issue to Executive, pursuant to a Stock Option
Agreement in the form attached as Exhibit B hereto, non-qualified
options to acquire 24,000 shares of Parent's Common Stock under
Parent's 1996 Stock Incentive Plan. The exercise price for the
options shall be equal to $58.875 per share. The vesting
schedule for such options shall be: 20% on the second
anniversary of the Effective Date, an additional 30% on the third
anniversary and the remaining 50% on the fourth anniversary, but
shall accelerate upon: (a)a "Change-in-Control" of Parent, as
defined in the Stock Option Agreement, (b)termination of
Executive's employment by the Company other than For Cause or (c)
termination of Executive's employment by Executive for Good
Reason.
4.05 Savings and Retirement Plans. During the Term,
Executive shall be eligible to participate in all savings and
retirement plans of Parent or the Company, to the extent
applicable generally to other senior executives of the Company.
For purposes of all such plans, the Company shall credit
Executive with full credit for all service credited under the
Wessels Group's 401(k) plan for purposes of eligibility to
participate and receive benefits and vesting but not for benefit
accruals in any Company retirement plan.
4.06 Welfare and Other Benefit Plans. During the Term,
Executive and/or Executive's family, as the case may be, shall be
eligible to participate in and shall receive all benefits under
welfare, fringe, vacation and other similar benefit plans and
programs provided by Parent or the Company (including, without
limitation, medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident insurance
plans and programs and perquisites) to the extent applicable
generally to other senior executives of Parent or the Company;
provided that the Company shall waive all pre-existing condition
limitations under any health plans to be waived with respect to
Executive and/or Executive's family. For purposes of all such
plans, Parent shall credit Executive with full credit for all
service credited under the corresponding benefit plans of WAH for
purposes of eligibility to participate and receive benefits and
for vesting but not for purposes of benefit accruals.
4.07 Expenses. During the Term, Executive shall be
entitled to receive prompt reimbursement for all reasonable
business expenses incurred by Executive in the performance of his
duties hereunder, in accordance with the policies of the Company.
5. Confidential Information. Except as expressly
permitted or directed by the Company, during the term of this
Agreement or at any time thereafter, Executive shall not divulge,
furnish or make accessible to anyone or use in any way (other
than for the benefit of and in the course of conducting the
business of the Company) any confidential or proprietary
knowledge or information of the Company or of any affiliate of
the Company, including the Wessels Group and the Company's other
subsidiaries and Parent, and its other direct and indirect
subsidiaries (collectively, the "Company Affiliates"), which
Executive has acquired or become acquainted with prior to the
term of this Agreement while working for the Wessels Group or
will acquire or become acquainted with during the term of this
Agreement, whether or not during regular working hours, in each
case, whether developed by himself or by others ("Confidential
Information"). Executive acknowledges that the Confidential
Information constitutes a unique and valuable asset of the
Company and of the respective Company Affiliates and represents a
substantial investment of time and expense by the Wessels Group,
the Company (through its acquisition of the Wessels Group in the
Merger and otherwise) and by the respective Company Affiliates
and that any disclosure or other use of Confidential Information
other than for the sole benefit of the Company or of any Company
Affiliate would be wrongful and would cause irreparable harm to
the Company or such Company Affiliate. The foregoing obligations
of confidentiality shall not apply to any Confidential
Information which (x) is at the time acquired by Executive, or
thereafter becomes, a part of the public domain other than
through the act or omission of Executive, (y) is lawfully
provided to a third party without any obligation of
confidentiality by the Company or any Company Affiliate or any
employee of the Company or any Company Affiliate in the ordinary
course of conducting the business of the Company or such Company
Affiliate or (z) is required by law or by the order of any court,
governmental agency or self-regulatory organization having
jurisdiction over the matter to be disclosed.
6. Noncompetition and Nonsolicitation Covenants. As a
significant inducement to the Company to enter into this
Agreement and provide the benefits to Executive hereunder, and as
a significant inducement to the Company to cause the Merger to
occur, both of which, Executive acknowledges, provide
considerable benefits to Executive, Executive agrees to the terms
of this Article 6, which terms Executive acknowledges and agrees
are reasonable and appropriate under the circumstances.
6.01 Noncompetition. During the period of Executive's
employment with the Company hereunder and for a period of two
years thereafter, Executive shall not, directly or indirectly,
compete with the Company in any manner or capacity (e.g., as an
advisor, principal, agent, partner, officer, director,
stockholder, employee, member of any association or otherwise) in
any phase of the equity capital markets underwriting, sales,
trading, financial advisory or merger and acquisitions advisory
businesses engaged in by the Company or any Company Affiliate
during the term of this Agreement (the "Covered Business"),
except as an employee of the Company, within the United States.
This Section 6.01 shall no longer apply after the Executive is
terminated for Cause or terminates for Good Reason.
6.02 Nonsolicitation of Employees. During the period
of Executive's employment with the Company hereunder and for a
period of two years thereafter, Executive shall not, directly or
indirectly, (a) induce or attempt to induce any employee of the
Company or of any Company Affiliate to leave the employ of the
Company or such Company Affiliate, respectively, or in any way
interfere adversely with the relationship between any such
employee and the Company or such Company Affiliate, or (b) induce
or attempt to induce any employee of the Company or of any
Company Affiliate to work for, render services or provide advice
to or supply confidential business information or trade secrets
of the Company or of any Company Affiliate to any third person,
firm or corporation.
6.03 Nonsolicitation of Customers. During the period
of Executive's employment with the Company hereunder and for a
period of two years thereafter, Executive shall not, directly or
indirectly, induce or attempt to induce any customer of the
Equity Capital Markets Group to reduce or cease doing business
with the Company.
6.04 Indirect Competition and Solicitation. During the
term of this Agreement and the period covered by Sections 6.01,
6.02 and 6.03 hereof, Executive shall not, directly or
indirectly, assist or encourage any other person in carrying out,
directly or indirectly, any activity that would be prohibited by
the provisions of Sections 6.01, 6.02 and/or 6.03 if such
activity were carried out by Executive, either directly or
indirectly.
6.05 Limitation on Covenant. Notwithstanding the
foregoing Sections 6.01 and 6.04 hereof, ownership by Executive,
as a passive investment, of less than 5% of the outstanding
shares of capital stock of any corporation listed on a national
securities exchange or publicly traded on any nationally
recognized over-the-counter market shall not constitute a breach
of this Article 6.
7. Termination of Employment.
7.01 Death/Disability. Executive's employment
shall terminate automatically upon Executive's death during the
Term. If the Company determines in good faith that Executive has
become Disabled (which term shall have the meaning given to it in
Parent's Long-Term Disability Plan), the Company may give written
notice to Executive in accordance with Section 8.02 hereof of its
intention to terminate Executive's employment. In such event,
Executive's employment with the Company shall terminate effective
on the 30th day after delivery of such notice by Executive;
provided that, if Executive shall have returned to full-time
performance of Executive's duties within such 30-day period,
Executive's employment shall not be so terminated.
7.02 For Cause. The Company may terminate
Executive's employment for Cause. For purposes of this
Agreement, "Cause" shall mean: (i) gross dereliction of his
duties hereunder, or (ii) engaging in any other willful
misconduct (including dishonesty or disloyalty to the Company)
that is materially injurious to the business, reputation,
regulatory status or customer or employee relations of the
Company, the Company's Equity Capital Markets Group or any
Company Affiliate, or (iii) material breach by Executive of this
Agreement which breach has not been cured within 30 days after
written notice of such breach has been delivered by the Company,
or (iv) conviction of any felony or gross misdemeanor involving
moral turpitude or fraud. No act or omission will be deemed
willful if it was taken in good faith or after consultation with
or at the direction of an officer to whom Executive reports.
Notwithstanding the foregoing, the Executive shall not
be deemed to have been terminated for Cause unless and until
there shall have been delivered to the Executive a copy of a
resolution duly adopted by the Board of Directors of the Company
at a meeting of the Board of Directors of the Company called and
held for such purpose (after reasonable notice to the Executive
and an opportunity for the Executive to be heard before the Board
of Directors of the Company), finding that in the good faith
opinion of the Board of Directors of the Company, the Executive
had engaged in the conduct set forth in clause (i), (ii), (iii)
or (iv) of this Section 7.02 and specifying the particulars
thereof.
7.03 For Good Reason. Executive may voluntarily
terminate his employment for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean (i) a material breach by
Parent or the Company of this Agreement, which breach has not
been cured within 30 days after written notice of the breach has
been delivered by Executive or (ii) requiring Executive to work
in a location more than 50 miles from downtown Minneapolis.
7.04 Effects of Employment Termination.
(a) Death or Disability. The Company shall pay
(within 30 days of death or disability) to Executive or his duly
appointed and acting personal representative, executor or
administrator, as the case may be, as the sole and exclusive
obligation to Executive: (i) all of Executive's accrued but
unpaid Base Salary, plus (ii) an amount such that Executive would
receive, in total, a percentage of the Guarantee equal to the
proportion of the calendar year covered by his employment prior
to the termination date and (iii) the value of any accrued,
vested benefits under applicable benefit plans in which he then
participates.
(b) For Cause; Voluntary Termination Without Good
Reason. The Company shall pay to Executive, as the sole and
exclusive obligation to Executive, all of Executive's accrued but
unpaid Base Salary and the value of any accrued, vested benefits
under applicable benefit plans in which he then participates.
(c) For Good Reason. The Company shall pay to
Executive, as the sole and exclusive obligation to Executive, the
Guarantee applicable to each year, or portion thereof, between
the termination date and December 31, 2000.
(d) Termination Without Cause. The Company shall pay
to Executive the Guarantee applicable to each year, or portion
thereof, between the termination date and December 31, 2000.
7.05 Notice of Termination. Any termination by the
Company for Cause, or by Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 8.02 of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated and (iii)
if the date of termination is other than the date of receipt of
such notice, specifies the termination date (which date shall be
not more than thirty days after the giving of such notice). The
failure by Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of
Executive or the Company, respectively, hereunder or preclude
Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing Executive's or the Company's rights
hereunder.
7.06 Surrender of Records and Property. Upon
termination of his employment with the Company, Executive shall
deliver promptly to the Company, all records, manuals, books,
blank forms, documents, letters, memoranda, notes, notebooks,
computer software, reports, data, tables or calculations or
copies thereof, which are the property of the Company or any
Company Affiliate or which relate in any way to the business,
products, practices or techniques of the Company or any Company
Affiliate, and all other property, trade secrets and other
Confidential Information of the Company or any Company Affiliate,
including, but not limited to, all Confidential Documents, which
in any of these cases are in his possession or under his control.
8. Miscellaneous.
8.01 Governing Law. This Agreement is made under and
shall be governed by and construed in accordance with the laws of
the State of Minnesota, without regard to conflicts of laws
principles thereof.
8.02 Notices. All notices, demands and other
communications to be given or delivered under or by reason of the
provisions of this Agreement will be in writing and will be
deemed to have been given when personally delivered or three days
after being mailed by first class mail, return receipt requested,
or when receipt is acknowledged, if sent by facsimile, telecopy
or other electronic transmission device. Notices, demands and
communications to the Company will, unless another address is
specified in writing, be sent to the address indicated below:
If to Executive:
c/o The Wessels Group
601 Second Avenue South
Minneapolis, MN 55402-4314
Facsimile: 612/373-6159
If to the Company:
Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402-4422
Facsimile: 612/371-7755
Attention: Chief Executive Officer
and
Attention: General Counsel
8.03 Negotiated Agreement. The parties agree that this
Agreement is the result of negotiations between the parties, with
the benefit of counsel, and that the language of this Agreement
shall not be construed for or against any particular party.
8.04 Prior Agreements. This Agreement (including
others specifically mentioned herein) contains the entire
agreement of the parties relating to the employment of Executive
by the Company and the other matters discussed herein and
supersedes all prior promises, contracts, agreements and
understandings of any kind, whether express or implied, oral or
written, with respect to such subject matter, and the parties
hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not
set forth herein.
8.05 Withholding Taxes. The Company may take such
action as it deems appropriate to insure that all applicable
federal, state, city and other payroll, withholding, income or
other taxes arising from any payments made pursuant to this
Agreement or otherwise as a result of Executive's employment with
the Company, and in order to comply with all applicable federal,
state, city and other tax laws or regulations, are withheld or
collected from Executive.
8.06 Termination, Amendment or Modification of
Agreement. This Agreement may be terminated, extended amended or
otherwise modified only by written agreement duly executed by
each of the Company and Executive.
8.07 No Waiver. No term or condition of this Agreement
shall be deemed to have been waived, nor shall there be any
estoppel to enforce any provisions of this Agreement, except by a
statement in writing signed by the party against whom enforcement
of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated,
shall operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condition for
the future or as to any act other than that specifically waived.
8.08 Assignment. This Agreement shall not be
assignable, in whole or in part, by either party without the
written consent of the other party, except that the Company may,
without the consent of Executive, assign its rights and
obligations under this Agreement to any corporation, firm or
other business entity with or into which the Company may merge or
consolidate, or to which the Company may sell or transfer all or
substantially all of its assets; provided that such corporation,
firm or other business entity shall assume in writing the
Company's obligations hereunder (any failure to do so
constituting a material breach by the Company of the terms
hereof). After any such assignment by the Company, the Company
shall be discharged from all further liability hereunder and such
assignee shall thereafter be deemed to be the Company for the
purposes of all provisions of this Agreement including this
Section 8.08. This Agreement shall be binding upon Executive's
heirs and representatives.
8.09 Arbitration. Executive and the Company agree
that, except with respect to any action for injunctive relief
pursuant to the provisions of Section 8.10 hereof, all other
disputes relating to, or arising out of, this Agreement, the
termination of this Agreement, Executive's employment with the
Company or the termination of Executive's employment shall be
submitted to arbitration before the New York Stock Exchange, Inc.
("NYSE") in accordance with the applicable provisions of the
Constitution and the rules of the Board of Directors of the NYSE,
as the sole and exclusive remedy for resolving such
controversies. Executive and the Company agree that the decision
of the arbitrator shall be final and binding and that a judgment
may be entered on such arbitration award in any court of
competent jurisdiction.
8.10 Injunctive Relief. Executive agrees that any
breach of the provisions of this Agreement, including without
limitation the provisions of Articles 5 and 6, would cause
irreparable harm to the Company for which the Company could not
be fully compensated by money damages. Accordingly, Executive
specifically agrees that the Company shall be entitled to
temporary and permanent injunctive relief to enforce the
provisions of this Agreement and that such relief may be granted
without the necessity of proving actual damages and without the
necessity of posting any bond in connection therewith. This
provision with respect to injunctive relief shall not, however,
diminish the right of the Company to claim and recover damages in
addition to injunctive relief.
8.11 Severability. To the extent that any provision of
this Agreement shall be determined to be invalid or
unenforceable, the invalid or unenforceable portion of such
provision shall be deleted from this Agreement, and the validity
and enforceability of the remainder of such provision and of this
Agreement shall be unaffected. If any time period or geographic
area referred to in Article 6 of this Agreement shall be
determined by any court or arbitration panel having jurisdiction
over any dispute between the Company and Executive arising
hereunder or otherwise in connection with Executive's employment
by the Company (including any termination of such employment by
either the Company or Executive) to be unreasonable, such time
period or geographic region shall be changed to the maximum
amount of time or largest geographic area that such court or
arbitration panel determines is reasonable under all of the facts
and circumstances.
8.12 Attorneys' Fees. If either party to this
Agreement seeks arbitration or brings an action (under either
Section 8.08 or 8.09 hereof) based upon this Agreement, the
Company shall pay all costs and expenses in connection with such
proceeding, including its reasonable attorneys' fees and the
costs of arbitration of the Executive, unless the Executive has
commenced a frivolous action.
IN WITNESS WHEREOF, Executive and the Company have
executed this Agreement as of the date set forth in the first
paragraph.
"EXECUTIVE"
Kenneth J. Wessels
------------------
Kenneth J. Wessels
DAIN RAUSCHER INCORPORATED
Irving Weiser
By -----------------------
Irving Weiser
Chairman and Chief Executive Officer
Accepted and agreed this day
of March, 1998, for purposes only
of Sections 3.03 and 4.04 hereof:
DAIN RAUSCHER CORPORATION
Irving Weiser
By ----------------------
Irving Wesier
Chairman and Chief Executive Officer
EXHIBIT A
Formula Bonus Opportunity
1. Executive will be eligible to earn a bonus tied to the
performance of the Company's post-Merger Equity Capital
Markets Group (using a compound annual growth rate revenue
target of 18%, and a fully allocated profit margin target of
18%), as described in the following example:
Total Net Percentage
Percentage Points in Excess Bonus Amount Formula
CAGR Margin Points of 36% X 10 Base Bonus Paid
---- ------ ---------- ---------------- ------------ ----------
18% 18% 36% -0- $1,500,000 -0-
30% 16% 46% 100% $1,500,000 $1,500,000
23% 23% 46% 100% $1,500,000 $1,500,000
28% 23% 51% 150% $1,500,000 $2,250,000
2. "CAGR" means compound annual growth rate.
3. "Margin" means fully allocated operating margins before the
Merger transaction costs, cost of capital and goodwill
amortization.
4. The Margin must equal or exceed 12% for a given period in
order for the formula to apply. If the Margin is less than
12%, Executive's bonus will be at the discretion of the
Company's Board of Directors.
5. The performance bonus amount determined by the above formula
may be increased or decreased by 20% based upon previously
agreed objectives.
6. 1998 base revenue: $148 million.
7. 1998 bonus amount base: $1.125 million.