Exhibit 10.4
EMPLOYMENT (CHANGE OF CONTROL) AGREEMENT
AGREEMENT made as of this ____ day of ______________, ____ by and between
Sheldahl, Inc., a Minnesota corporation with its principal offices at
Northfield, Minnesota ("Sheldahl") and _________________________________
(the "Executive").
WHEREAS, Sheldahl considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best
interests of Sheldahl and its shareholders; and
WHEREAS, the Executive has made and is expected to make, due to Executive's
intimate knowledge of the business and affairs of Sheldahl, its policies,
methods, personnel and problems, a significant contribution to the
profitability, growth and financial strength of Sheldahl; and
WHEREAS, Sheldahl, 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 Executive in the performance of the
Executive's duties to the detriment of Sheldahl and its shareholders; and
WHEREAS, Executive is willing to remain in the employ of Sheldahl upon the
understanding that Sheldahl will provide income security if the Executive's
employment is terminated under certain terms and conditions; and
WHEREAS, it is in the best interests of Sheldahl and its stockholders to
reinforce and encourage the continued attention and dedication of management
personnel, including Executive, to their assigned duties without distraction
and to ensure the continued availability to Sheldahl of the Executive in the
event of a Change in Control.
THEREFORE, in consideration of the foregoing and other respective covenants
and agreements of the parties herein contained, the parties hereto agree as
follows:
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until August 21, 1999. After August 21,
1999, this Agreement shall automatically renew for successive one-year
periods unless Sheldahl notifies the Executive of termination of the
Agreement at least sixty (60) days prior to the end of the initial term
or any renewal term. Notwithstanding the preceding sentence, if a
Change in Control occurs, this Agreement shall continue in effect for
a period of 36 months from the date of the occurrence of a Change in
Control. Notwithstanding anything herein to the contrary, the
Executive's employment shall be at all times at the will of Sheldahl,
and nothing in this Agreement shall prohibit or limit the right of
Sheldahl or Executive, prior to a Change in Control, to terminate the
employment of Executive for any reason or for no reason.
2. Change in Control. No benefits shall be payable hereunder unless there
shall have been a Change in Control, as set forth below.
(a) For purposes of this Agreement, a "Change in Control" of Sheldahl
shall mean a change in control which would be required to be reported
in response to Item 1 of Form 8-K promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
Sheldahl is then subject to such reporting requirement, including,
without limitation, if:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
Sheldahl representing 20% or more of the combined voting power of
Sheldahl's then outstanding securities;
(ii) there ceases to be a majority of the Board of Directors comprised of:
(A) individuals who on the date hereof constituted the Board of
Sheldahl, and (b) any new director who subsequently was elected
or nominated for election by a majority of the directors who held
such office immediately prior to a Change in Control; or
(iii) Sheldahl disposes of at least 75% of its assets, other than to an
entity owned 50% or greater by Sheldahl or any of its subsidiaries.
(b) A Change in Control which arises from a transaction or series of
transactions which are not authorized, recommended or approved by
formal action taken by the Board of Directors as determined in Section
2(a)(ii) above shall be referred to as an "Unapproved Change in
Control." A Change in Control which has been authorized, recommended
or approved by the Board of Directors as determined in Section 2(a)
(ii) above shall be referred to as an "Approved Change in Control."
(c) Executive agrees that, subject to the terms and conditions of this
Agreement, in the event of a Change in Control of Sheldahl occurring
after the date hereof, Executive will remain in the employ of Sheldahl
for a period of 12 months from the occurrence of such Change in Control
of Sheldahl.
3. Termination Following Change in Control. If a Change in Control shall
have occurred during the term of this Agreement and Executive's
employment is thereafter terminated, Executive shall be entitled to
the benefits provided in subsection 4(d) unless such termination is
(A) because of Executive's Death or Retirement, (B) by Sheldahl for
Cause or Disability, or (C) by Executive other than for Good Reason.
(a) Disability; Retirement. If, as a result of incapacity due to
physical or mental illness, the Executive shall have been absent from
the full-time performance of Executive's duties with Sheldahl for six
consecutive months, and within 30 days after written Notice of
Termination is given the Executive shall not have returned to the full-
time performance of the Executive's duties, Sheldahl may terminate
Executive's employment for "Disability". Any question as to the
existence of Executive's Disability upon which Executive and Sheldahl
cannot agree shall be determined by a qualified independent physician
selected by Executive (or, if the Executive is unable to make such
selection, it shall be made by any adult member of the Executive's
immediate family), and approved by Sheldahl. The determination of
such physician made in writing to Sheldahl and to Executive shall be
final and conclusive for all purposes of this Agreement. Termination
by Executive of Executive's employment based on "Retirement" shall
mean retirement at or after the date the Executive has attained age 65.
(b) Cause. Termination by Sheldahl of Executive's employment for "Cause"
shall mean: (i) the willful and continued failure of Executive to
perform his essential duties; (ii) the willful engaging by Executive
in illegal conduct, or (iii) gross misconduct materially injurious to
Sheldahl, which, in the case of clause (i) and (iii), the Executive
has not cured, in the sole opinion of the Board, determined in good
faith, within 10 days of receipt of the Notice of Termination.
(c) Good Reason. Executive shall be entitled to terminate his employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without Executive's express written consent, any of the following:
(i) the assignment to Executive of any duties inconsistent with Executive's
status or position with Sheldahl, or a substantial reduction in the
nature or status of Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(ii) a reduction by Sheldahl in Executive's annual base salary in effect
immediately prior to a Change in Control;
(iii) the relocation of Sheldahl's principal executive offices to a location
more than fifty miles from Northfield, Minnesota or Sheldahl requiring
Executive to be based anywhere other than Sheldahl's principal
executive offices except for required travel on Sheldahl's business
to an extent substantially consistent with Executive's prior business
travel obligations;
(iv) the failure by Sheldahl to continue to provide Executive with benefits
a least as favorable to those enjoyed by Executive under any of
Sheldahl's pension, life insurance, medical, health and accident,
disability, deferred compensation, incentive awards, incentive stock
options, or savings plans in which Executive was participating at the
time of the Change in Control, the taking of any action by Sheldahl
which would directly or indirectly materially reduce any of such
benefits or deprive Executive of any material fringe benefit enjoyed
at the time of the Change in Control, or the failure by Sheldahl to
provide Executive with the number of paid vacation days to which
Executive is entitled at the time of the Change in Control, provided,
however, that Sheldahl may amend any such plan or programs as long as
such amendments do not reduce any benefits to which Executive would
be entitled upon termination;
(v) the failure of Sheldahl to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as
contemplated in Section 5; or
(vi) any purported termination of Executive's employment which is not made
pursuant to a Notice of Termination satisfying the requirements of
subsection (e) below; for purposes of this Agreement, no such purported
termination shall be effective.
(d) Voluntary Termination Deemed Good Reason. Notwithstanding anything
herein to the contrary, Executive may voluntarily terminate his
employment for any reason during the period commencing on the first
anniversary of the Change in Control and ending 30 days thereafter.
If an Unapproved Change in Control occurs, Executive may, in addition
to the opportunity provided in the preceding sentence, voluntarily
terminate his employment for any reason during the period commencing
on the 91st day following a Change in Control and ending on the 180th
day following a Change in Control. Any such termination shall be
deemed "Good Reason" for all purposes of this Agreement.
(e) Notice of Termination. Any purported termination of Executive's
employment by Sheldahl or by Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with
Section 7. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth the facts
and circumstances claimed to provide a basis for termination of
Executive's employment.
(f) Date of Termination. For purposes of this Agreement, "Date of
Termination" shall mean:
(i) if Executive's employment is terminated for Disability, 30 days after
Notice of Termination is given (provided that the Executive shall not
have returned to the full-time performance of the Executive's duties
during such 30 day period); and
(ii) if Executive's employment is terminated pursuant to subsections (b),
(c) or (d) above or for any other reason (other than Disability), the
date specified in the Notice of Termination (which, in the case of a
termination pursuant to subsection (b) above shall not be less than
10 days, and in the case of a termination pursuant to subsection (c)
or (d) above shall not be less than 10 nor more than 30 days,
respectively, from the date such Notice of Termination is given).
(g) Dispute of Termination. If, within 10 days after any Notice of
Termination is given, the party receiving such Notice of Termination
notifies the other party in good faith 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 judgement, order or decree of a court
of competent jurisdiction in accordance with subsection 11(a) (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, Sheldahl shall continue to pay Executive
full compensation in effect when the notice giving rise to the dispute
was given (including, but not limited to, base salary) and continue
Executive as a participant in all compensation, benefit and insurance
plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved
in accordance with this subsection. 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.
4. Compensation Upon Termination or During Disability. Following a Change
in Control of Sheldahl, as defined in subsection 2(a), upon termination
of Executive's employment or during a period of Disability, Executive
shall be entitled to the following benefits:
(a) During any period that Executive fails to perform full-time duties with
Sheldahl as a result of a Disability, Sheldahl shall pay Executive the
base salary of the Executive at the rate in effect at the commencement
of any such period, until such time as the Executive is determined to
be eligible for long term disability benefits in accordance with
Sheldahl's insurance programs then in effect.
(b) If Executive's employment shall be terminated by Sheldahl for Cause or
by Executive other than for Good Reason or Retirement, Sheldahl shall
pay to Executive his full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given and
Sheldahl shall have no further obligation to Executive under this
Agreement.
(c) If Executive's employment shall be terminated by Sheldahl for
Disability or by Executive for Retirement, or by reason of Death,
Sheldahl shall immediately commence payment to the Executive (or
Executive's designated beneficiaries or estate, if no beneficiary is
designated) any and all benefits to which the Executive is entitled
under Sheldahl's retirement and insurance programs then in effect.
(d) If Executive's employment by Sheldahl shall be terminated (A) by
Sheldahl other than for Cause or Disability or (B) by Executive for
Good Reason, then Executive shall be entitled to the benefits provided
below:
(i) Sheldahl shall pay Executive the Executive's full base salary through
the Date of Termination at the rate in effect at the time the Notice
of Termination is given;
(ii) In lieu of any further salary payments for periods subsequent to the
Date of Termination, Sheldahl shall pay a severance payment (the
"Severance Payment") equal to the amount described in (A) or (B)
below, whichever is applicable: (A) if an Unapproved Change in Control
occurs, 2.99 times the average of the annual compensation paid to
Executive by Sheldahl (or any corporation ("Affiliate") affiliated
with Sheldahl within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code")) and includable in
Executive's gross income for federal income tax purposes for the five
calendar years (or, if Executive has been employed by Sheldahl for less
than five years, the number of complete calendar years of employment)
(the "Base Period") preceding the earlier of the calendar year in which
a Change in Control of Sheldahl occurred or the calendar year of the
Date of Termination; or (B) if an Approved Change of Control occurs,
1.5 times such compensation. Such average shall be determined in
accordance with the temporary or final regulations promulgated under
Section 280G(e) of the Code. For purposes of this Section 4, except
as provided in the next sentence, compensation payable to Executive by
Sheldahl (or an Affiliate) shall include every type and form of
compensation includable in Executive's gross income for federal income
tax purposes. Compensation shall exclude compensation recognized as
the result of the exercise of stock options or sale of the stocks
acquired or any payments actually or constructively received with
respect to a plan of deferred compensation between Sheldahl and
Executive. The Severance Payment shall be made within 60 days after
the Date of Termination.
(iii) For the period of time after the Date of Termination on which the
Severance Payment is determined in accordance with paragraph (ii)
above, Executive shall be entitled to continue participation in the
life, disability, accident and health insurance benefit plans of
Sheldahl substantially similar to those which the Executive is
receiving or entitled to receive immediately prior to the Notice of
Termination. Sheldahl and Executive shall share the cost associated
with such coverage as if Executive were still actively employed by
Sheldahl. If Executive cannot be covered under any of Sheldahl's group
plans or policies, Sheldahl shall reimburse Executive for his full cost
of obtaining comparable alternative group or individual coverage
elsewhere, less any contribution that Executive would have been
required to make under Sheldahl's group plans or policies. Benefits
otherwise receivable by Executive pursuant to this paragraph (iii)
shall be reduced to the extent comparable benefits are actually
received by Executive during such period, and any such benefits
actually received by Executive shall be reported to Sheldahl.
(iv) The Severance Payment shall be reduced by the value of benefits
actually provided in (iii) above and by the amount of any other
payment or the value of any benefit received or to be received by
Executive in connection with the termination of employment or
contingent upon a Change in Control of Sheldahl (whether payable
pursuant to the terms of this Agreement, any other plan, agreement
or arrangement with Sheldahl or an Affiliate) unless (1) Executive
shall have effectively waived receipt or enjoyment of such payment or
benefit prior to the date of payment of the Severance Payment, (2) in
the opinion of tax counsel selected by Sheldahl and acceptable to
executive, such other payment or benefit does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of the
Code, or (3) in the opinion of such tax counsel, the Severance Payment
(in its full amount or as partially reduced, as the case may be) plus
all other payments or benefits which constitute "parachute payments"
within the meaning of section 280G(b)(2) of the Code are reasonable
compensation for services actually rendered, within the meaning of
section 290G(b)(4) of the Code, and such payments are deductible by
Sheldahl. The value of any non-cash benefit or any deferred cash
payment shall be determined by Sheldahl in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
(v) If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding that, notwithstanding the good
faith of Executive and Sheldahl in applying the terms of this
Subsection 4(d), the aggregate "parachute payments" paid to or for
Executive's benefit are in an amount that would result in any portion
of such "parachute payments" not being deductible by Sheldahl or its
Affiliates by reason of section 280G of the Code, then Executive
shall have an obligation to pay Sheldahl upon demand an amount equal
to the sum of (1) the excess of the aggregate "parachute payments" paid
to or for the Executive's benefit over the aggregate "parachute
payments" that would have been paid to or for the Executive's benefit
without any portion of such "parachute payments" not being deductible
by reason of section 280G of the Code; and (2) interest on the amount
set forth in clause (1) of this sentence at the applicable Federal
rate (as defined in section 1274(d) of the Code) from the date of
Executive's receipt of such excess until the date of such payment.
(vi) The Severance Payment shall be in lieu of and offset the amount of
any payment to which the Executive may be entitled to in connection
with the termination of employment pursuant to the provisions of
Sheldahl's Severance Pay Plan, Document No. HR04.14, as amended from
time to time, or any successor to such policy.
(e) Executive shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided
for in this Section 4 be reduced by any compensation earned by
Executive 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 Section 4.
(f) In addition to all other amounts payable to Executive under this
Section 4, Executive shall be entitled to receive all benefits payable
to the Executive under the Sheldahl, Inc. Employee Savings Plan and
any other plan or agreement relating to retirement benefits or
otherwise generally applicable to executive employees.
5. Employee Agreement. Executive entered into an Employee Agreement with
Sheldahl in May 1996. The Employee Agreement contains certain
provisions regarding confidentiality and assignment of inventions
and non-compete provisions. If there is an Unapproved Change in
Control and thereafter Executive's employment with Sheldahl shall be
terminated (A) by Sheldahl other than for Cause or Disability, or (B)
by Executive for Good Reason (other than under Section 3(d) of this
Agreement), then the Executive shall be released from his non-compete
obligations under Section IV.B of the Employee Agreement. If there
is an Approved Change in Control and thereafter Executive's employment
with Sheldahl shall be terminated (A) by Sheldahl other than for Cause
or Disability, or (B) by Executive for Good Reason (other than under
Section 3(d) of this Agreement), then the Executive shall be released
from his non-compete obligations under Section IV.B of the Employee
Agreement following 12 months from the Date of Termination. All other
obligations of Executive under the Employee Agreement shall continue.
The Severance Payment shall constitute an offset against payments to
which Executive may be entitled to in connection with the Employee
Agreement and acceptance of such Severance Payment shall constitute
a waiver of such payments required under the Employee Agreement but
only up to the amount of the Severance Payment.
6. Funding of Payments. In order to assure the performance by Sheldahl
or its successor of its obligations under this Agreement, Sheldahl may
deposit in trust an amount equal to the maximum payment that will be
due the Executive under the terms hereof. Under a written trust
instrument, the Trustee shall be instructed to pay to the Executive
(or the Executive's legal representative, as the case may be) the
amount to which the Executive 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 Sheldahl. If Sheldahl deposits funds in
trust, any payment therefrom shall be made within five days after the
occurrence of any event giving rise to Sheldahl's obligation to make
such payment hereunder. If and to the extent there are not amounts
in trust sufficient to pay Executive under this Agreement, Sheldahl
shall remain liable for any and all payments due to Executive. In
accordance with the terms of such trust, at all times during the term
of this Agreement Executive shall have no rights, other than as an
unsecured general creditor of Sheldahl, to any amounts held in trust
and all trust assets shall be general assets of Sheldahl and subject
to the claims of creditors of Sheldahl.
7. Successors; Binding Agreement.
(a) Sheldahl 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 of Sheldahl to expressly assume and
agree to perform this Agreement in the same manner and to the same
extent that Sheldahl would be required to perform it if no such
succession had taken place. Failure of Sheldahl to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle
Executive to compensation from Sheldahl 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
Executive's personal or legal representatives, successors, heirs, and
designated beneficiaries. If executive should die while any amount
would still be payable to Executive hereunder if the Executive had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
Executive's designated beneficiaries, or, if there is no such
designated beneficiary, to the Executive's estate.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
United States registered or certified mail, return receipt requested,
postage pre-paid, addressed to the last known residence address of the
Executive or in the case of Sheldahl, to its principal office to the
attention of each of the then directors of Sheldahl with a copy to
its Secretary, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
9. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by the parties. No waiver by either party
thereto at anytime of any breach by the other party to this Agreement
of, or compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or
similar time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of
Minnesota.
10. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceablity of any other
provision of this Agreement, which shall remain in full force and
effect.
11. Arbitration and Award of Attorneys' Fees.
(a) Any dispute arising between the parties relating to this Agreement
shall be resolved by binding arbitration held in the City of
Minneapolis pursuant to the Rules of the American Arbitration
Association, except as hereinafter expressly modified. If the
disputing and responding parties are unable to agree upon a resolution
within forty-five business days after the responding party's receipt
of written notice from the disputing party setting forth the nature
of the dispute, within the following ten business days the disputing
and responding parties shall select a mutually acceptable single
arbitrator to resolve the dispute or, if the parties fail or are
unable to do so, each shall within the following ten business days
select a single arbitrator, and the two so selected shall select a
third arbitrator within the following ten business days. Such single
arbitrator or, as the case may be, panel of three arbitrators acting
by majority decision, shall resolve the dispute within sixty days
after the date such arbitrator, or the last of them so selected, is
selected, or as soon thereafter as practicable. If either party
refuses or fails to select an arbitrator within the time therefor,
the other party may do so on such refusing or failing party's behalf.
The arbitrators shall have no power to award any punitive or exemplary
damages but may construe or interpret but shall not ignore or vary
the terms of this Agreement and shall be bound by controlling law.
The parties acknowledge the Executive's failure to comply with any
confidentiality, non-solicit, and non-compete provisions of any
agreement to which the Executive is bound will cause immediate and
irreparable injury to Sheldahl and that therefore the arbitrators,
or a court of competent jurisdiction if an arbitration panel cannot
be immediately convened, will be empowered to provide injunctive
relief, including temporary or preliminary relief, to restrain any
such failure to comply. The arbitration award or other resolution
may be entered as a judgment at the request of the prevailing party
by any court of competent jurisdiction in Minnesota or elsewhere.
(b) In the event Sheldahl fails to pay Executive any amounts owing to
Executive under this Agreement or to provide Executive any benefits
to which Executive is ultimately determined, by settlement, mediation,
arbitration, or by any court or other decision making body with
jurisdiction, to be entitled to under this Agreement, Sheldahl shall
pay the legal expenses (including reasonable attorneys' fees, court
costs and other out-of-pocket expenses), incurred by Executive to
enforce his rights under this Agreement and collect or obtain such
amounts or benefits.
12. Prior Agreement. This Agreement supersedes and replaces in its
entirety all prior agreements related to a change in control of
Sheldahl, including any prior Employment Agreement between Sheldahl
and Executive.
SHELDAHL, INC.
By /S/ James E. Donaghy
President and Chief Executive Officer
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<TEXT>
Exhibit 10.5
EMPLOYMENT (CHANGE OF CONTROL) AGREEMENT
AGREEMENT made as of this 21st day of August, 1996 by and between Sheldahl,
Inc., a Minnesota corporation with its principal offices at Northfield,
Minnesota ("Sheldahl") and James E. Donaghy (the "Executive").
WHEREAS, Sheldahl considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing the best
interests of Sheldahl and its shareholders; and
WHEREAS, the Executive has made and is expected to make, due to Executive's
intimate knowledge of the business and affairs of Sheldahl, its policies,
methods, personnel and problems, a significant contribution to the
profitability, growth and financial strength of Sheldahl; and
WHEREAS, Sheldahl, 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 Executive in the performance
of the Executive's duties to the detriment of Sheldahl and its shareholders;
and
WHEREAS, Executive is willing to remain in the employ of Sheldahl upon the
understanding that Sheldahl will provide income security if the Executive's
employment is terminated under certain terms and conditions; and
WHEREAS, it is in the best interests of Sheldahl and its stockholders to
reinforce and encourage the continued attention and dedication of management
personnel, including Executive, to their assigned duties without distraction
and to ensure the continued availability to Sheldahl of the Executive in the
event of a Change in Control.
THEREFORE, in consideration of the foregoing and other respective covenants
and agreements of the parties herein contained, the parties hereto agree as
follows:
1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until August 21, 1999. After August 21,
1999, this Agreement shall automatically renew for successive one-
year periods unless Sheldahl notifies the Executive of termination
of the Agreement at least sixty (60) days prior to the end of the
initial term or any renewal term. Notwithstanding the preceding
sentence, if a Change in Control occurs, this Agreement shall
continue in effect for a period of 36 months from the date of the
occurrence of a Change in Control. Notwithstanding anything herein
to the contrary, the Executive's employment shall be at all times at
the will of Sheldahl, and nothing in this Agreement shall prohibit
or limit the right of Sheldahl or Executive, prior to a Change in
Control, to terminate the employment of Executive for any reason or
for no reason.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a Change in Control, as set forth below.
(a) For purposes of this Agreement, a "Change in Control" of Sheldahl
shall mean a change in control which would be required to be reported
in response to Item 1 of Form 8-K promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
Sheldahl is then subject to such reporting requirement, including,
without limitation, if:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities
of Sheldahl representing 20% or more of the combined voting power
of Sheldahl's then outstanding securities;
(ii) there ceases to be a majority of the Board of Directors comprised
of : (A) individuals who on the date hereof constituted the Board
of Sheldahl, and (b) any new director who subsequently was elected
or nominated for election by a majority of the directors who held
such office immediately prior to a Change in Control; or
(iii) Sheldahl disposes of at least 75% of its assets, other than to an
entity owned 50% or greater by Sheldahl or any of its subsidiaries.
(b) A Change in Control which arises from a transaction or series of
transactions which are not authorized, recommended or approved by
formal action taken by the Board of Directors as determined in
Section 2(a)(ii) above shall be referred to as an "Unapproved Change
in Control." A Change in Control which has been authorized,
recommended or approved by the Board of Directors as determined in
Section 2(a)(ii) above shall be referred to as an "Approved Change
in Control."
(c) Executive agrees that, subject to the terms and conditions of this
Agreement, in the event of a Change in Control of Sheldahl occurring
after the date hereof, Executive will remain in the employ of Sheldahl
for a period of 12 months from the occurrence of such Change in
Control of Sheldahl.
3. Termination Following Change in Control. If a Change in Control
shall have occurred during the term of this Agreement and Executive's
employment is thereafter terminated, Executive shall be entitled to
the benefits provided in subsection 4(d) unless such termination is
(A) because of Executive's Death or Retirement, (B) by Sheldahl for
Cause or Disability, or (C) by Executive other than for Good Reason.
(a) Disability; Retirement. If, as a result of incapacity due
to physical or mental illness, the Executive shall have been
absent from the full-time performance of Executive's duties with
Sheldahl for six consecutive months, and within 30 days after
written Notice of Termination is given the Executive shall not have
returned to the full-time performance of the Executive's duties,
Sheldahl may terminate Executive's employment for "Disability".
Any question as to the existence of Executive's Disability upon
which Executive and Sheldahl cannot agree shall be determined by
a qualified independent physician selected by Executive (or, if the
Executive is unable to make such selection, it shall be made by
any adult member of the Executive's immediate family), and approved
by Sheldahl. The determination of such physician made in writing
to Sheldahl and to Executive shall be final and conclusive for all
purposes of this Agreement. Termination by Executive of Executive's
employment based on "Retirement" shall mean retirement at or after
the date the Executive has attained age 65.
(b) Cause. Termination by Sheldahl of Executive's employment for "Cause"
shall mean: (i) the willful and continued failure of Executive to
perform his essential duties; (ii) the willful engaging by Executive
in illegal conduct, or (iii) gross misconduct materially injurious
to Sheldahl, which, in the case of clause (i) and (iii), the
Executive has not cured, in the sole opinion of the Board,
determined in good faith, within 10 days of receipt of the Notice
of Termination.
(c) Good Reason. Executive shall be entitled to terminate his employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without Executive's express written consent, any of the
following:
(i) the assignment to Executive of any duties inconsistent with
Executive's status or position with Sheldahl, or a substantial
reduction in the nature or status of Executive's responsibilities
from those in effect immediately prior to the Change in Control;
(ii) a reduction by Sheldahl in Executive's annual base salary in effect
immediately prior to a Change in Control;
(iii) the relocation of Sheldahl's principal executive offices to a
location more than fifty miles from Northfield, Minnesota or
Sheldahl requiring Executive to be based anywhere other than
Sheldahl's principal executive offices except for required travel
on Sheldahl's business to an extent substantially consistent with
Executive's prior business travel obligations;
(iv) the failure by Sheldahl to continue to provide Executive with
benefits a least as favorable to those enjoyed by Executive under
any of Sheldahl's pension, life insurance, medical, health and
accident, disability, deferred compensation, incentive awards,
incentive stock options, or savings plans in which Executive was
participating at the time of the Change in Control, the taking of
any action by Sheldahl which would directly or indirectly materially
reduce any of such benefits or deprive Executive of any material
fringe benefit enjoyed at the time of the Change in Control, or the
failure by Sheldahl to provide Executive with the number of paid
vacation days to which Executive is entitled at the time of the
Change in Control, provided, however, that Sheldahl may amend any
such plan or programs as long as such amendments do not reduce any
benefits to which Executive would be entitled upon termination;
(v) the failure of Sheldahl to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as
contemplated in Section 5; or
(vi) any purported termination of Executive's employment which is not
made pursuant to a Notice of Termination satisfying the requirements
of subsection (e) below; for purposes of this Agreement, no such
purported termination shall be effective.
(d) Voluntary Termination Deemed Good Reason. Notwithstanding anything
herein to the contrary, Executive may voluntarily terminate his
employment for any reason during the period commencing on the first
anniversary of the Change in Control and ending 30 days thereafter.
If an Unapproved Change in Control occurs, Executive may, in addition
to the opportunity provided in the preceding sentence, voluntarily
terminate his employment for any reason during the period commencing
on the 91st day following a Change in Control and ending on the 180th
day following a Change in Control. Any such termination shall be
deemed "Good Reason" for all purposes of this Agreement.
(e) Notice of Termination. Any purported termination of Executive's
employment by Sheldahl or by Executive shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 7. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon
and shall set forth the facts and circumstances claimed to provide
a basis for termination of Executive's employment.
(f) Date of Termination. For purposes of this Agreement, "Date of
Termination" shall mean:
(i) if Executive's employment is terminated for Disability, 30 days
after Notice of Termination is given (provided that the Executive
shall not have returned to the full-time performance of the
Executive's duties during such 30 day period); and
(ii) if Executive's employment is terminated pursuant to subsections
(b), (c) or (d) above or for any other reason (other than Disability),
the date specified in the Notice of Termination (which, in the case
of a termination pursuant to subsection (b) above shall not be
less than 10 days, and in the case of a termination pursuant to
subsection (c) or (d) above shall not be less than 10 nor more than
30 days, respectively, from the date such Notice of Termination is
given).
(g) Dispute of Termination. If, within 10 days after any Notice of
Termination is given, the party receiving such Notice of Termination
notifies the other party in good faith 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 judgement, order or
decree of a court of competent jurisdiction in accordance with
subsection 11(a) (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, Sheldahl shall continue to pay Executive full
compensation in effect when the notice giving rise to the dispute
was given (including, but not limited to, base salary) and continue
Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when
the notice giving rise to the dispute was given, until the dispute
is finally resolved in accordance with this subsection. 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.
4. Compensation Upon Termination or During Disability. Following a
Change in Control of Sheldahl, as defined in subsection 2(a), upon
termination of Executive's employment or during a period of
Disability, Executive shall be entitled to the following benefits:
(a) During any period that Executive fails to perform full-time duties
with Sheldahl as a result of a Disability, Sheldahl shall pay
Executive the base salary of the Executive at the rate in effect at
the commencement of any such period, until such time as the Executive
is determined to be eligible for long term disability benefits in
accordance with Sheldahl's insurance programs then in effect.
(b) If Executive's employment shall be terminated by Sheldahl for Cause
or by Executive other than for Good Reason or Retirement, Sheldahl
shall pay to Executive his full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination
is given and Sheldahl shall have no further obligation to Executive
under this Agreement.
(c) If Executive's employment shall be terminated by Sheldahl for
Disability or by Executive for Retirement, or by reason of Death,
Sheldahl shall immediately commence payment to the Executive (or
Executive's designated beneficiaries or estate, if no beneficiary
is designated) any and all benefits to which the Executive is
entitled under Sheldahl's retirement and insurance programs then
in effect.
(d) If Executive's employment by Sheldahl shall be terminated (A) by
Sheldahl other than for Cause or Disability or (B) by Executive for
Good Reason, then Executive shall be entitled to the benefits
provided below:
(i) Sheldahl shall pay Executive the Executive's full base salary
through the Date of Termination at the rate in effect at the time
the Notice of Termination is given;
(ii) In lieu of any further salary payments for periods subsequent to
the Date of Termination, Sheldahl shall pay a severance payment (the
"Severance Payment") equal to the amount described in (A) or (B)
below, whichever is applicable: (A) if an Unapproved Change in
Control occurs, 2.99 times the average of the annual compensation
paid to Executive by Sheldahl (or any corporation ("Affiliate")
affiliated with Sheldahl within the meaning of Section 1504 of
the Internal Revenue Code of 1986, as amended (the "Code")) and
includable in Executive's gross income for federal income tax
purposes for the five calendar years (or, if Executive has been
employed by Sheldahl for less than five years, the number of
complete calendar years of employment) (the "Base Period") preceding
the earlier of the calendar year in which a Change in Control of
Sheldahl occurred or the calendar year of the Date of Termination;
or (B) if an Approved Change of Control occurs, 1.5 times such
compensation. Such average shall be determined in accordance with
the temporary or final regulations promulgated under Section 280G(e)
of the Code. For purposes of this Section 4, except as provided in
the next sentence, compensation payable to Executive by Sheldahl
(or an Affiliate) shall include every type and form of compensation
includable in Executive's gross income for federal income tax
purposes. Compensation shall exclude compensation recognized as
the result of the exercise of stock options or sale of the stocks
acquired or any payments actually or constructively received with
respect to a plan of deferred compensation between Sheldahl and
Executive. The Severance Payment shall be made within 60 days
after the Date of Termination.
(iii) For the period of time after the Date of Termination on which the
Severance Payment is determined in accordance with paragraph (ii)
above, Executive shall be entitled to continue participation in the
life, disability, accident and health insurance benefit plans of
Sheldahl substantially similar to those which the Executive is
receiving or entitled to receive immediately prior to the Notice
of Termination. Sheldahl and Executive shall share the cost
associated with such coverage as if Executive were still actively
employed by Sheldahl. If Executive cannot be covered under any of
Sheldahl's group plans or policies, Sheldahl shall reimburse
Executive for his full cost of obtaining comparable alternative
group or individual coverage elsewhere, less any contribution that
Executive would have been required to make under Sheldahl's group
plans or policies. Benefits otherwise receivable by Executive
pursuant to this paragraph (iii) shall be reduced to the extent
comparable benefits are actually received by Executive during such
period, and any such benefits actually received by Executive shall
be reported to Sheldahl.
(iv) The Severance Payment shall be reduced by the value of benefits
actually provided in (iii) above and by the amount of any other
payment or the value of any benefit received or to be received by
Executive in connection with the termination of employment or
contingent upon a Change in Control of Sheldahl (whether payable
pursuant to the terms of this Agreement, any other plan, agreement
or arrangement with Sheldahl or an Affiliate) unless (1) Executive
shall have effectively waived receipt or enjoyment of such payment
or benefit prior to the date of payment of the Severance Payment,
(2) in the opinion of tax counsel selected by Sheldahl and acceptable
to executive, such other payment or benefit does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of the
Code, or (3) in the opinion of such tax counsel, the Severance
Payment (in its full amount or as partially reduced, as the case
may be) plus all other payments or benefits which constitute
"parachute payments" within the meaning of section 280G(b)(2) of
the Code are reasonable compensation for services actually rendered,
within the meaning of section 290G(b)(4) of the Code, and such
payments are deductible by Sheldahl. The value of any non-cash
benefit or any deferred cash payment shall be determined by Sheldahl
in accordance with the principles of sections 280G(d)(3) and (4) of
the Code.
(v) If it is established pursuant to a final determination of a court
or an Internal Revenue Service proceeding that, notwithstanding
the good faith of Executive and Sheldahl in applying the terms
of this Subsection 4(d), the aggregate "parachute payments" paid
to or for Executive's benefit are in an amount that would result
in any portion of such "parachute payments" not being deductible
by Sheldahl or its Affiliates by reason of section 280G of the Code,
then Executive shall have an obligation to pay Sheldahl upon demand
an amount equal to the sum of (1) the excess of the aggregate
"parachute payments" paid to or for the Executive's benefit over
the aggregate "parachute payments" that would have been paid to
or for the Executive's benefit without any portion of such
"parachute payments" not being deductible by reason of section
280G of the Code; and (2) interest on the amount set forth in
clause (1) of this sentence at the applicable Federal rate (as
defined in section 1274(d) of the Code) from the date of
Executive's receipt of such excess until the date of such payment.
(vi) The Severance Payment shall be in lieu of and offset the amount
of any payment to which the Executive may be entitled to in connection
with the termination of employment pursuant to the provisions of
Sheldahl's Severance Pay Plan, Document No. HR04.14, as amended
from time to time, or any successor to such policy.
(e) Executive shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment
or otherwise, nor shall the amount of any payment or benefit provided
for in this Section 4 be reduced by any compensation earned by
Executive 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 Section 4.
(f) In addition to all other amounts payable to Executive under this
Section 4, Executive shall be entitled to receive all benefits
payable to the Executive under the Sheldahl, Inc. Employee Savings
Plan and any other plan or agreement relating to retirement benefits
or otherwise generally applicable to executive employees.
5. Employee Agreement. Executive entered into an Employee Agreement
with Sheldahl in May 1996. The Employee Agreement contains certain
provisions regarding confidentiality and assignment of inventions
and non-compete provisions. If there is an Unapproved Change in
Control and thereafter Executive's employment with Sheldahl shall
be terminated (A) by Sheldahl other than for Cause or Disability,
or (B) by Executive for Good Reason (other than under Section 3(d)
of this Agreement), then the Executive shall be released from his
non-compete obligations under Section IV.B of the Employee
Agreement. If there is an Approved Change in Control and
thereafter Executive's employment with Sheldahl shall be terminated
(A) by Sheldahl other than for Cause or Disability, or (B) by
Executive for Good Reason (other than under Section 3(d) of this
Agreement), then the Executive shall be released from his non-compete
obligations under Section IV.B of the Employee Agreement following
12 months from the Date of Termination. All other obligations of
Executive under the Employee Agreement shall continue. The
Severance Payment shall constitute an offset against payments to
which Executive may be entitled to in connection with the Employee
Agreement and acceptance of such Severance Payment shall constitute
a waiver of such payments required under the Employee Agreement but
only up to the amount of the Severance Payment.
6. Funding of Payments. In order to assure the performance by Sheldahl
or its successor of its obligations under this Agreement, Sheldahl
may deposit in trust an amount equal to the maximum payment that will
be due the Executive under the terms hereof. Under a written trust
instrument, the Trustee shall be instructed to pay to the Executive
(or the Executive's legal representative, as the case may be) the
amount to which the Executive 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 Sheldahl. If Sheldahl
deposits funds in trust, any payment therefrom shall be made within
five days after the occurrence of any event giving rise to Sheldahl's
obligation to make such payment hereunder. If and to the extent
there are not amounts in trust sufficient to pay Executive under
this Agreement, Sheldahl shall remain liable for any and all payments
due to Executive. In accordance with the terms of such trust, at all
times during the term of this Agreement Executive shall have no
rights, other than as an unsecured general creditor of Sheldahl,
to any amounts held in trust and all trust assets shall be general
assets of Sheldahl and subject to the claims of creditors of Sheldahl.
7. Successors; Binding Agreement.
(a) Sheldahl 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 of Sheldahl to expressly assume
and agree to perform this Agreement in the same manner and to the
same extent that Sheldahl would be required to perform it if no
such succession had taken place. Failure of Sheldahl to obtain
such assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall
entitle Executive to compensation from Sheldahl 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
Executive's personal or legal representatives, successors, heirs,
and designated beneficiaries. If executive should die while any
amount would still be payable to Executive hereunder if the Executive
had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement
to the Executive's designated beneficiaries, or, if there is no
such designated beneficiary, to the Executive's estate.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
mailed by United States registered or certified mail, return
receipt requested, postage pre-paid, addressed to the last known
residence address of the Executive or in the case of Sheldahl, to
its principal office to the attention of each of the then directors
of Sheldahl with a copy to its Secretary, or to such other address
as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall
be effective only upon receipt.
9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge
is agreed to in writing and signed by the parties. No waiver by
either party thereto at anytime of any breach by the other party
to this Agreement of, or compliance with, any condition or provision
of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or similar time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota.
10. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceablity of
any other provision of this Agreement, which shall remain in full
force and effect.
11. Arbitration and Award of Attorneys' Fees.
(a) Any dispute arising between the parties relating to this Agreement
shall be resolved by binding arbitration held in the City of
Minneapolis pursuant to the Rules of the American Arbitration
Association, except as hereinafter expressly modified. If the
disputing and responding parties are unable to agree upon a
resolution within forty-five business days after the responding
party's receipt of written notice from the disputing party setting
forth the nature of the dispute, within the following ten business
days the disputing and responding parties shall select a mutually
acceptable single arbitrator to resolve the dispute or, if the
parties fail or are unable to do so, each shall within the following
ten business days select a single arbitrator, and the two so
selected shall select a third arbitrator within the following ten
business days. Such single arbitrator or, as the case may be, panel
of three arbitrators acting by majority decision, shall resolve the
dispute within sixty days after the date such arbitrator, or the
last of them so selected, is selected, or as soon thereafter as
practicable. If either party refuses or fails to select an
arbitrator within the time therefor, the other party may do so
on such refusing or failing party's behalf. The arbitrators
shall have no power to award any punitive or exemplary damages
but may construe or interpret but shall not ignore or vary the
terms of this Agreement and shall be bound by controlling law.
The parties acknowledge the Executive's failure to comply with
any confidentiality, non-solicit, and non-compete provisions of
any agreement to which the Executive is bound will cause immediate
and irreparable injury to Sheldahl and that therefore the arbitrators,
or a court of competent jurisdiction if an arbitration panel cannot
be immediately convened, will be empowered to provide injunctive
relief, including temporary or preliminary relief, to restrain any
such failure to comply. The arbitration award or other resolution
may be entered as a judgment at the request of the prevailing party
by any court of competent jurisdiction in Minnesota or elsewhere.
(b) In the event Sheldahl fails to pay Executive any amounts owing to
Executive under this Agreement or to provide Executive any benefits
to which Executive is ultimately determined, by settlement,
mediation, arbitration, or by any court or other decision making
body with jurisdiction, to be entitled to under this Agreement,
Sheldahl shall pay the legal expenses (including reasonable attorneys'
fees, court costs and other out-of-pocket expenses), incurred by
Executive to enforce his rights under this Agreement and collect
or obtain such amounts or benefits.
12. Prior Agreement. This Agreement supersedes and replaces in its
entirety all prior agreements related to a change in control of
Sheldahl, including the Employment Agreement between Sheldahl
and Executive, except the provisions of Section 7 of the First
Amendment to Employment Agreement related to deferred compensation
shall remain in full force and effect and shall continue in effect
so long as Executive is employed by Sheldahl, even if this Agreement
terminates in accordance with the provisions of Section 1.
SHELDAHL, INC.
By /s/ James S. Womack
James S. Womack