CHANGE OF CONTROL TERMINATION AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into this 3 day of March,
1997, by and between ULTRA PAC, INC., a Minnesota corporation ("Ultra Pac"), and
GREGORY L. NELSON, an individual residing in the State of Minnesota (the
"Executive").
RECITALS
A. The parties recognize that the Executive's contribution to the
growth and success of Ultra Pac has been substantial. The Board of Directors of
Ultra Pac (the "Board") desires to provide for the continued employment of the
Executive and to make certain changes in the Executive's employment arrangements
with Ultra Pac which the Board has determined will reinforce and encourage the
continued attention and dedication of the Executive as a member of the
management of Ultra Pac.
B. It is expressly recognized by the parties that the Executive's
employment with Ultra Pac and agreement to be bound by the terms of this
Agreement represent a substantial commitment to Ultra Pac in terms of the
Executive's personal and professional career and a foregoing of present and
future career options by the Executive, for all of which Ultra Pac receives
substantial value.
C. The parties recognize that a Change of Control, as defined herein,
is likely to result in material alteration or diminishment of the Executive's
position and responsibilities and substantially frustrate the purpose of the
Executive's commitment to Ultra Pac and forbearance of other career options.
D. The parties recognize that in light of the above-described
commitment and forbearance of other career options, it is essential that, for
the benefit of Ultra Pac and its stockholders, provision be made for a Change in
Control Termination, as defined herein, in order to enable the Executive to
effectively continue in the Executive's position in the face of inherently
disruptive circumstances arising from the possibility of a Change of Control of
Ultra Pac, although no such change is now contemplated or foreseen.
E. The parties have previously entered into agreements and undertakings
with respect to the Executive's employment and compensation, and the parties
wish to supplement such previous agreements and undertakings.
NOW, THEREFORE, in consideration of the foregoing recitals, the
Executive's continued employment with and by Ultra Pac, and the mutual benefits
to be gained by the performance hereof, the parties hereto agree as follows:
1.) Definitions. For purposes of this Agreement, the following
definitions shall be applied:
(a) "Base Salary" shall mean regular cash compensation paid on
a periodic basis exclusive of benefits, bonuses or incentive payments,
if any.
(b) "Board" or "Board of Directors" shall mean the board of
directors of Ultra Pac.
(c) "Change of Control" shall mean any merger, combination,
sale, transfer, exchange, reorganization, or other transaction whereby:
(1) any "person" (as such term is defined in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934), entity, or group of associated persons or
entities acting in concert becomes the "beneficial
owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac
representing fifty percent (50%) or more of the
voting control of Ultra Pac's then issued and
outstanding securities, which person, entity or group
is not affiliated (within the meaning of the
Securities Act of 1933) with Ultra Pac as of the date
of this Agreement; or
(2) any "person" (as such term is defined in Sections
13(d) and 14(d) of the Securities Exchange Act of
1934), entity, or group of associated persons or
entities acting in concert becomes the "beneficial
owner" (as defined in Rule 13d-3 under such Act),
directly or indirectly, of securities of Ultra Pac
representing thirty percent (30%) or more of the
voting control of Ultra Pac's then issued and
outstanding securities, which person, entity or group
is not affiliated (within the meaning of the
Securities Act of 1933) with Ultra Pac as of the date
of this Agreement, coupled with a change in the
composition of the Board of fifty percent (50%) or
more of the membership of the Board.
(d) "Change of Control Payments" shall mean any payment
(including any benefit or transfer of property) in the nature of
compensation, to or for the benefit of the Executive under any
arrangement which is partially or entirely contingent on a Change of
Control, or is deemed to be contingent on a change of control or
ownership of Ultra Pac for purposes of Section 280G of the Code. As
used in this definition, the term "arrangement" includes any agreement
between the Executive and Ultra Pac and any and all of Ultra Pac's
salary, bonus, incentive, compensation or benefit plans, programs or
arrangements, and shall include this Agreement.
(e) "Change of Control Termination" shall mean, with respect
to the Executive, any of the following events occurring within one (1)
year after a Change of Control.
(1) Termination of the Executive's employment by Ultra
Pac or its successors; or
(2) Termination of employment with Ultra Pac by the
Executive pursuant to Section 2. A Change of Control
Termination by the Executive shall not, however,
include termination by reason of death, disability or
retirement.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any reference to a section of the Code shall mean that
section of the Internal Revenue Code of 1986, as amended, or the
corresponding section of such Code as hereafter amended.
(g) "Good Reason" shall mean a good faith determination by the
Executive, in the Executive's sole and absolute judgment, that any one
or more of the following events has occurred, without the Executive's
express written consent, after a Change of Control:
(1) A change in the Executive's reporting
responsibilities, titles or offices as in effect
immediately prior to the Change of Control, or any
removal of the Executive from, or any failure to
re-elect the Executive to, any position which has the
effect of diminishing Executive's responsibility or
authority;
(2) A reduction by Ultra Pac in the Executive's Base
Salary as in effect immediately prior to the Change
of Control or as the same may be increased from time
to time, or a change in the eligibility requirements
or performance criteria under any bonus, incentive or
compensation plan, program or arrangement under which
the Executive is covered immediately prior to the
Change of Control, which adversely affects the
Executive;
(3) Without replacement by a plan providing benefits to
the Executive equal to or greater than those
discontinued, the failure by Ultra Pac to continue in
effect, within its maximum stated term, any pension,
bonus, incentive, stock ownership, purchase, option,
life insurance, health insurance, accident and
disability insurance, or any other employee benefit
plan, program, or arrangement in which the Executive
is participating at the time of the Change of
Control, or the taking of any action by Ultra Pac
that would adversely affect the Executive's
participation or materially reduce the Executive's
benefits under any of such plans or benefits as such
participation or benefits may exist at the time of
the Change of Control;
(4) The taking of any action by Ultra Pac that would
materially adversely affect the physical conditions
existing at the time of the Change of Control in or
under which the Executive performs his or her
employment duties;
(5) The failure by Ultra Pac to obtain a binding and
enforceable agreement, signed by any successor to
Ultra Pac, providing for the assumption by such
successor of the obligations of Ultra Pac under this
Agreement, and the agreement of such successor to
perform all obligations of Ultra Pac under this
Agreement; or
(6) Any purported termination by Ultra Pac of this
Agreement or the employment of the Executive by Ultra
Pac which is not expressly authorized by this
Agreement or any breach of this Agreement by Ultra
Pac.
2.) Change of Control Termination Right and Compensation. For a period
of one (1) year following a Change of Control, the Executive shall have the
right, at any time and within the Executive's sole discretion, to terminate
employment with Ultra Pac for Good Reason. Such termination shall be
accomplished by, and effective upon, the Executive giving written notice to
Ultra Pac of the Executive's decision to terminate such employment. In the event
of a Change of Control Termination, and subject to the "Limitation on Change of
Control Compensation" contained in Section 3 herein, then, and without further
action by the Board or otherwise, Ultra Pac shall, within the thirty (30) days
of such termination, make a lump sum payment to the Executive in an amount equal
to two times the Executive's "annualized includible compensation for the base
period," as defined in Section 280G(d)(1) of the Code.
3.) Limitation on Change of Control Compensation. In the event that the
Executive is a "disqualified individual" within the meaning of Section 280G of
the Code, the parties hereto expressly agree that the payments described in
Section 2 above shall be considered together with all other Change of Control
Payments so that, with respect to the Executive, all Change of Control Payments
are collectively subject to an overall maximum limit. Such maximum limit shall
be One Dollar ($1.00) less than the largest amount under which no portion of the
Change of Control Payments is considered a "parachute payment" within the
meaning of Section 280G of the Code. Accordingly, to the extent that the Change
of Control Payments would be considered a "parachute payment" with respect to
the Executive, the portions of such Change of Control Payments shall be reduced
or eliminated in the following order until the remaining Change of Control
Payments with respect to the Executive is One Dollar ($1.00) less than the
maximum allowable which would not be considered a "parachute payment" under
Section 280G of the Code:
(a) First, any cash payment to the Executive;
(b) Second, any Change of Control Payments not described herein;
and
(c) Third, any forgiveness of indebtedness of the Executive to
Ultra Pac.
The Executive expressly and irrevocably waives any and all rights to receive any
Change of Control Payments which would be considered a "parachute payment" under
the Code.
4.) Attorneys' Fees. In the event the Executive incurs any legal
expense to enforce or defend his or her rights under this Agreement, or to
recover damages for breach thereof, the Executive shall be entitled to recover
from Ultra Pac any actual expenses for attorneys' fees and disbursements
incurred.
5.) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of Ultra Pac, whether by way
of merger, consolidation, operation of law, assignment, purchase or other
acquisition of substantially all of the assets or business of Ultra Pac, and any
such successors or assigns shall absolutely and unconditionally assume all of
Ultra Pac's obligations hereunder.
6.) Notices. All notices, requests and demands given to or made
pursuant hereto shall, except as otherwise specified herein, be in writing and
be delivered personally or mailed by certified mail, return receipt requested,
to any such party at its address which:
(a) In the case of Ultra Pac shall be:
Ultra Pac, Inc.
21925 Industrial Boulevard
Rogers, Minnesota 55374
With a copy to:
Larkin, Hoffman, Daly & Lindgren, Ltd.
1500 Norwest Financial Center
7900 Xerxes Avenue South
Bloomington, Minnesota 55431
Attn: Frank I. Harvey, Esq.
(b) In the case of the Executive shall be:
Gregory L. Nelson
1061 Delaware Ave.
Mendota Heights, MN 55118
Either party may, by notice hereunder, designate a changed address. Any notice,
if delivered or mailed properly, shall be deemed dispatched on the registered
date or that stamped on the certified mail receipt, and shall be deemed received
within the second business day thereafter or when it is actually received,
whichever is sooner.
7.) Captions. The various headings or captions in this Agreement are
for convenience only and shall not affect the meaning or interpretation of this
Agreement.
8.) Governing Law. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota, and any and
every legal proceeding arising out of or in connection with this Agreement shall
be brought in the appropriate courts of the State of Minnesota. Each of the
parties hereby consenting to the exclusive jurisdiction of said courts for this
purpose.
9.) Construction. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.) Waivers. No failure on the part of either party to exercise, and
no delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right or remedy granted hereby or by any related document or by law.
11.) Modification. This Agreement may not be and shall not be modified
or amended except by written instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EXECUTIVE ULTRA PAC, INC.
/s/ Gregory L. Nelson By: /s/ Calvin S. Krupa
- ------------------------------------ -----------------------------------
Gregory L. Nelson Calvin S. Krupa
Its: President