MANAGEMENT AGREEMENT
AGREEMENT entered into as of October 1, 1998, by and between Tennant
Company, a Minnesota corporation (the "Company"), and John T. Pain (the
"Employee").
WITNESSETH:
WHEREAS, the Employee is a key member of the management of the Company
and has heretofore devoted substantial skill and effort to the affairs of the
Company, and the Board of Directors of the Company desires to recognize the
significant personal contribution that the Employee has made to further the
best interests of the Company and its stockholders; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders to continue to obtain the benefits of the Employee's
services and attention to the affairs of the Company; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders to provide inducement for the Employee (A) to remain in the
service of the Company in the event of any proposed or anticipated change in
control of the Company and (B) to remain in the service of the Company in
order to facilitate an orderly transition in the event of a change in control
of the Company; and
WHEREAS, it is desirable and in the best interests of the Company and
its stockholders that the Employee be in a position to make judgments and
advise the Company with respect to proposed changes in control of the Company
without regard to the possibility that Employee's employment may be
terminated without compensation in the event of certain changes in control of
the Company; and
WHEREAS, the Employee desires to be protected in the event of certain
changes in control of the Company; and
WHEREAS, for the reasons set forth above, the Company and the Employee
desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the Company and the Employee agree
as follows:
1. EMPLOYMENT. The Employee shall remain in the employ of the
Company for the term of this Agreement (the "Term"), and during the Term,
the Employee shall have such title, duties, responsibilities and authority,
and receive such remuneration and fringe benefits, as the Board of Directors
of the Company shall from time to time provide for the Employee; provided,
however, that either the Employee or the Company may terminate the employment
of the Employee at any time prior to the expiration of the Term, with or
without Cause and for any reason whatever, upon at least 30 days' prior
written notice to the other party, subject to the right of the Employee to
receive any payment and other benefits that may be due pursuant to the terms
and conditions of paragraph 2 of this Agreement.
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2. RIGHTS TO PAYMENT FOLLOWING CHANGE IN CONTROL. For purposes of
this paragraph 2, an "Event" shall be deemed to have occurred if:
A. a majority of the directors of the Company shall be persons other
than persons
(i) for whose election proxies shall have been solicited by the
Board of Directors of the Company or
(ii) who are then serving as directors appointed by the Board of
Directors to fill vacancies on the Board of Directors
caused by death or resignation (but not by removal) or to
fill newly created directorships,
B. 30% or more of the outstanding voting stock of the Company is
acquired or beneficially owned (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, or any successor rule
thereto (the "Exchange Act")) by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act), provided, however, that the following acquisitions
and beneficial ownership shall not constitute Events pursuant to
this paragraph 2B:
(i) any acquisition or beneficial ownership by the Company or a
subsidiary of the Company or
(ii) any acquisition or beneficial ownership by any employee
benefit plan (or related trust) sponsored or maintained by
the Company or one or more of its subsidiaries,
(iii) any acquisition or beneficial ownership by the Employee or
any group that includes the Employee, or
(iv) any acquisition or beneficial ownership by a parent
corporation or its wholly-owned subsidiaries, as long as
they shall remain wholly-owned subsidiaries, of 100% of the
outstanding voting stock of the Company as a result of a
merger or statutory share exchange which complies with
paragraph 2C(i)(2) or the exception in paragraph 2C(ii)
hereof in all respects,
C. the shareholders of the Company approve a definitive agreement or
plan to
(i) merge or consolidate the Company with or into another
corporation (other than (1) a merger or consolidation with
a subsidiary of the Company or (2) a merger in which
(a) the Company is the surviving corporation,
(b) no outstanding voting stock of the Company (other
than fractional shares) held by shareholders
immediately prior to the merger is converted into
cash, securities, or other property (except
(I) voting stock of a parent corporation owning
directly, or indirectly through wholly-owned
subsidiaries, both beneficially and of record 100%
of the voting stock of the Company immediately after
the merger or (II) cash upon the exercise by holders
of voting stock of the Company of statutory
dissenters' rights),
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(c) the persons who were the beneficial owners,
respectively, of the outstanding common stock and
outstanding voting stock of the Company immediately
prior to such merger beneficially own, directly or
indirectly, immediately after the merger, more than
70% of, respectively, the then outstanding common
stock and the then outstanding voting stock of the
surviving corporation or its parent corporation, and
(d) if voting stock of the parent corporation is
exchanged for voting stock of the Company in the
merger, all holders of any class or series of voting
stock of the Company immediately prior to the merger
have the right to receive substantially the same per
share consideration in exchange for their voting
stock of the Company as all other holders of such
class or series),
(ii) exchange, pursuant to a statutory exchange of shares of
voting stock of the Company held by shareholders of the
Company immediately prior to the exchange, shares of one or
more classes or series of voting stock of the Company for
cash, securities or other property, except for (a) voting
stock of a parent corporation of the Company owning
directly, or indirectly through wholly-owned subsidiaries,
both beneficially and of record 100% of the voting stock of
the Company immediately after the statutory share exchange
if (I) the persons who were the beneficial owners,
respectively, of the outstanding common stock and
outstanding voting stock of the Company immediately prior
to such statutory share exchange own, directly or
indirectly, immediately after the statutory share exchange
more than 70% of, respectively, the then outstanding common
stock and the then outstanding voting stock of such parent
corporation, and (II) all holders of any class or series of
voting stock of the Company immediately prior to the
statutory share exchange have the right to receive
substantially the same per share consideration in exchange
for their voting stock of the Company as all other holders
of such class or series or (b) cash with respect to
fractional shares of voting stock of the Company or payable
as a result of the exercise by holders of voting stock of
the Company of statutory dissenters' rights,
(iii) sell or otherwise dispose of all or substantially all of
the assets of the Company (in one transaction or a series
of transactions), or
(iv) liquidate or dissolve the Company, unless a majority of the
voting stock (or the voting equity interest) of the
surviving corporation or its parent corporation or of any
corporation (or other entity) acquiring all or
substantially all of the assets of the Company (in the case
of a merger, consolidation or disposition of assets) or the
Company or its parent corporation (in the case of a
statutory share exchange) is, immediately following the
merger, consolidation, statutory share exchange or
disposition of assets, beneficially owned by the Employee
or a group of persons, including the Employee, acting in
concert, or
D. (i) the Company enters into an agreement in principle or a
definitive agreement relating to an Event described in
clause A, B or C above which ultimately results in such an
Event described in clause A, B or C hereof,
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(ii) a tender or exchange offer or proxy contest is commenced
which ultimately results in an Event described in clause A
or B hereof, or
(iii) there shall be an involuntary termination or Constructive
Involuntary Termination of employment of Employee, and
Employee reasonably demonstrates that such event (x) was
requested by a third party that has previously taken other
steps reasonably calculated to result in an Event described
in clause A, B or C above and which ultimately result in an
Event described in clause A, B or C hereof or (y) otherwise
arose in connection with or in anticipation of an Event
described in clause A, B or C above that ultimately occurs.
If any Event shall occur during the Term of this Agreement, then the Employee
shall be entitled to receive from the Company or its successor (which term as
used herein shall include any person acquiring all or substantially all of
the assets of the Company) a cash payment and other benefits on the following
basis (unless the Employee's employment by the Company is terminated
voluntarily or involuntarily prior to the occurrence of the earliest Event to
occur (the "First Event"), in which case the Employee shall be entitled to no
payment or benefits under this paragraph 2):
(a) If at the time of, or at any time after, the occurrence of the
First Event and prior to the end of the Transition Period, the
employment of the Employee with the Company is voluntarily or
involuntarily terminated for any reason (unless such termination
is a voluntary termination by the Employee other than a
Constructive Involuntary Termination or is on account of the death
or Disability of the Employee or is a termination by the Company
for Cause), the Employee (or the Employee's legal representative,
as the case may be), subject to the limitations set forth in
paragraph 2(e),
(i) shall be entitled to receive from the Company or its
successor, upon such termination of employment with the
Company or its successor, a cash payment in an amount equal
to A) three times the average annual compensation payable
by the Company and includible in the gross income for
Federal Income Tax purposes of the Employee during the
shorter of the period consisting of the most recent five
completed taxable years of the Employee ending before the
First Event (other than an Event described in clause D of
this paragraph 2 unless the Employee is terminated prior to
the occurrence of an Event described in clause A, B or C of
this paragraph 2) or that portion of such period during
which the Employee was employed by the Company, less
B $1.00, such payment to be made to the Employee by the
Company or its successor in a lump sum at the time of such
termination of employment; and
(ii) shall be entitled until the end of the Transition Period to
participate in any health, disability and life insurance
plan or program in which the Employee was entitled to
participate immediately prior to the First Event as if he
or she were an employee of the Company until the end of the
Transition Period (except, with respect to health insurance
coverage, for those portions remaining until the end of the
Transition Period that duplicate health insurance coverage
that is in place for the Employee under any other policy
provided at the expense of another employer); provided
however, that in the event that the Employee's
participation in any such health, disability or life
insurance plan or program is
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barred, the Company, at its sole cost and expense, shall
arrange to provide the Employee with benefits substantially
similar to those which the Employee is entitled to receive
under such plan or program.
(b) The payments provided for in this paragraph 2 shall be in addition
to any salary or other remuneration otherwise payable to the
Employee on account of employment by the Company or one or more of
its subsidiaries or its successor (including any amounts received
prior to such termination of employment for personal services
rendered after the occurrence of the First Event) but shall be
reduced by any severance pay which the Employee receives from the
Company, its subsidiaries or its successor under any other policy
or agreement of the Company in the event of involuntary
termination of Employee's employment.
(c) The Company shall also pay to the Employee all legal fees and
expenses incurred by the Employee as a result of such termination,
including, but not limited to, all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this
Agreement.
(d) In the event that at any time from the date of the First Event
until the end of the Transition Period,
(i) the Employee shall not be given substantially equivalent or
greater title, duties, responsibilities and authority or
substantially equivalent or greater salary and other
remuneration and fringe benefits (including paid vacation),
in each case as compared with the Employee's status
immediately prior to the First Event, other than for Cause
or on account of Disability,
(ii) the Company shall have failed to obtain assumption of this
Agreement by any successor as contemplated by
paragraph 4(b) hereof,
(iii) the Company shall require the Employee to relocate to any
place other than a location within twenty-five miles of the
location at which the Employee performed his duties
immediately prior to the First Event or, if the Employee
performed such duties at the Company's principal executive
offices, the Company shall relocate its principal executive
offices to any location other than a location within
twenty-five miles of the location of the principal
executive offices immediately prior to the First Event, or
(iv) the Company shall require that the Employee travel on
Company business to a substantially greater extent than
required immediately prior to the First Event,
a termination of employment with the Company by the Employee thereafter
shall constitute a Constructive Involuntary Termination.
(e) Notwithstanding any provision to the contrary contained herein
except the last sentence of this paragraph 2(e), if the lump sum
cash payment due and the other benefits to which the Employee
shall become entitled under paragraph 2(a) hereof, either alone or
together with other payments in the nature of compensation to the
Employee which are contingent on a change in the ownership or
effective control of the Company or in the ownership of a
substantial portion of the assets of the
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Company or otherwise, would constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986 (the
"Code") or any successor provision thereto, such lump sum payment
and/or such other benefits and payments shall be reduced (but not
below zero) to the largest aggregate amount as will result in no
portion thereof being subject to the excise tax imposed under
Section 4999 of the Code (or any successor provision thereto) or
being non-deductible to the Company for Federal Income Tax
purposes pursuant to Section 280G of the Code (or any successor
provision thereto). The Employee in good faith shall determine
the amount of any reduction to be made pursuant to this
paragraph 2(e) and shall select from among the foregoing benefits
and payments those which shall be reduced. No modification of, or
successor provision to, Section 280G or Section 4999 subsequent to
the date of this Agreement shall, however, reduce the benefits to
which the Employee would be entitled under this Agreement in the
absence of this paragraph 2(e) to a greater extent than they would
have been reduced if Section 280G and Section 4999 had not been
modified or superseded subsequent to the date of this Agreement,
notwithstanding anything to the contrary provided in the first
sentence of this paragraph 2(e).
(f) The Employee shall not be required to mitigate the amount of any
payment or other benefit provided for in paragraph 2 by seeking
other employment or otherwise, nor (except as specifically
provided in paragraph 2(a)(ii)) shall the amount of any payment or
other benefit provided for in paragraph 2 be reduced by any
compensation earned by the Employee as the result of employment by
another employer after termination, or otherwise.
(g) The obligations of the Company under this paragraph 2 shall
survive the termination of this Agreement.
3. DEFINITION OF CERTAIN TERMS.
(a) As used herein, the term "person" shall mean an individual,
partnership, corporation, estate, trust or other entity.
(b) As used herein, the term "Cause" shall mean, and be limited to,
(i) willful and gross neglect of duties by the Employee or (ii) an
act or acts committed by the Employee constituting a felony and
substantially detrimental to the Company or its reputation.
(c) As used herein, the term "Disability" shall mean the Employee's
absence from his duties with the Company on a full time basis for
180 consecutive business days, as a result of the Employee's
incapacity due to physical or mental illness, unless within 30
days after written notice pursuant to paragraph 1 hereof is given
following such absence, the Employee shall have returned to the
full time performance of his duties.
(d) As used herein, the term "voting stock" shall mean all outstanding
shares of capital stock entitled to vote generally in the election
of directors, considered for purposes of this Agreement as one
class, and all references to percentages of the voting stock shall
be deemed to be references to percentages of the total voting
power of the voting stock.
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(e) As used herein, the term "Transition Period" shall mean the
three-year period commencing on the date of the earliest to occur
of an Event described in clause A, B or C of paragraph 2 hereof
(the "Commencement Date") and ending on the third anniversary of
the Commencement Date.
4. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon and inure to the benefit of
the successors, legal representatives and assigns of the parties
hereto; provided, however, that the Employee shall not have any
right to assign, pledge or otherwise dispose of or transfer any
interest in this Agreement or any payments hereunder, whether
directly or indirectly or in whole or in part, without the written
consent of the Company or its successor.
(b) The Company will require any successor (whether direct or
indirect, by purchase of a majority of the outstanding voting
stock of the Company or all or substantially all of the assets of
the Company, or by merger, consolidation or otherwise), by
agreement in form and substance satisfactory to the Employee, to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required
to perform it if no such succession had taken place. Failure of
the Company to obtain such agreement prior to the effectiveness of
any such succession (other than in the case of a merger or
consolidation) shall be a breach of this Agreement and shall
entitle the Employee to compensation from the Company in the same
amount and on the same terms as the Employee would be entitled
hereunder if the Employee terminated his employment on account of
a Constructive Involuntary Termination, except that for purposes
of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the date of
termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which is required to execute and
deliver the agreement provided for in this paragraph 4(b) or which
otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
5. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Minnesota.
6. NOTICES. All notices, requests and demands given to or made
pursuant hereto shall be in writing and shall be delivered or mailed to any
such party at its address which:
(a) In the case of the Company shall be:
Tennant Company
701 N. Lilac Drive
Minneapolis, Minnesota 55440
Attention: Chief Executive Officer
(b) In the case of the Employee shall be:
John T. Pain
303 Macalester Street
St. Paul, MN 55105
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Either party may, by notice hereunder, designate a changed address. Any
notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed to have been given on the registered date or
that date stamped on the certified mail receipt.
7. SEVERABILITY; SEVERANCE. In the event that any portion of this
Agreement is held to be invalid or unenforceable for any reason, it is hereby
agreed that such invalidity or unenforceability shall not affect the other
portions of this Agreement and that the remaining covenants, terms and
conditions or portions hereof shall remain in full force and effect, and any
court of competent jurisdiction may so modify the objectionable provision as
to make it valid, reasonable and enforceable. In the event that any benefits
to the Employee provided in this Agreement are held to be unavailable to the
Employee as a matter of law, the Employee shall be entitled to severance
benefits from the Employer, in the event of an involuntary termination or
Constructive Involuntary Termination of employment of the Employee (other
than a termination on account of the death or Disability of the Employee or a
termination for Cause) during the term of this Agreement occurring at the
time of or following the occurrence of an Event, at least as favorable to the
Employee (when taken together with the benefits under this Agreement that are
actually received by the Employee) as the most advantageous benefits made
available by the Employer to employees of comparable position and seniority
to the Employee during the five-year period prior to the First Event.
8. TERM. This Agreement shall commence on the date of this Agreement
and shall terminate, and the Term of this Agreement shall end, on the later
of (A) December 31, 1998, provided that such period shall be automatically
extended for one year and from year to year thereafter until notice of
termination is given by the Employer or the Employee to the other party
hereto at least 60 days prior to December 31, 1998 or the one-year extension
period then in effect, as the case may be, or (B) if the Commencement Date
occurs prior to December 31, 1998 (or prior to the end of the extension year
then in effect as provided for in clause (A) hereof), the third anniversary
of the Commencement Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TENNANT COMPANY
By ________________________________
___________________________________
John T. Pain
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