EMPLOYMENT (CHANGE IN CONTROL)
AGREEMENT
AGREEMENT made
effective as of this 12 day of October, 2009 by and between
WSI Industries, Inc., a Minnesota corporation with its principal
offices at Wayzata, Minnesota (“WSI”) and Benjamin
Rashleger (the “Executive”).
WHEREAS, WSI
considers the establishment and maintenance of a sound and vital
management to be essential to protecting and enhancing the best
interests of WSI 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
WSI, its policies, methods, personnel and problems, a significant
contribution to the profitability, growth and financial strength of
WSI; and
WHEREAS, WSI, 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 WSI
and its shareholders; and
WHEREAS, Executive
is willing to remain in the employ of WSI upon the understanding
that WSI 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 WSI 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 WSI 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 October 12, 2010. This
Agreement shall automatically renew for successive one-year periods
unless WSI 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 12 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 WSI, and nothing in this Agreement shall prohibit or limit the
right of WSI 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 WSI shall
be deemed to occur when and if any of the following
occur:
(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 WSI representing 50% or more of the
combined voting power of WSI’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 WSI, and (B) any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened contest, including but not limited to a proxy or consent
solicitation, relating to the election of directors of WSI or a
settlement of such contest or consent solicitation) 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 (the individuals designated in (A) and (B) shall
be referred to as the “Incumbent Directors”);
or
(iii) WSI disposes
of at least 75% of its assets, other than to an entity owned 50% or
greater by WSI 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 a majority of the Incumbent Directors shall be referred to
as an “Unapproved Change in Control.” A Change in
Control which has been authorized, recommended or approved by a
majority of the Incumbent Directors shall be referred to as an
“Approved Change in Control.”
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 WSI 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 WSI 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, WSI may
terminate Executive’s employment for
“Disability”. Any question as to the existence of
Executive’s Disability upon which Executive and WSI 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
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by WSI. The
determination of such physician made in writing to WSI 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 WSI 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) willful misconduct materially injurious to WSI, 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. An act
of Executive shall not be deemed “willful” unless done
or omitted to be done by Executive not in good faith and without
reasonable belief that the act or omission was in WSI’s best
interests.
(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 WSI, 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 WSI in Executive’s annual base salary in
effect immediately prior to a Change in Control;
(iii)
the relocation of Executive’s principal executive offices to
a location more than fifty miles from Executive’s principal
office prior to the Change in Control, except for required travel
on WSI’s business to an extent substantially consistent with
Executive’s prior business travel obligations;
(iv)
the failure by WSI to continue to provide Executive with benefits
substantially similar to those enjoyed by Executive under any of
WSI’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 WSI 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 WSI 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 WSI 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;
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(v) the failure of
WSI to obtain a satisfactory agreement from any successor to assume
and agree to perform this Agreement, as contemplated in
Section 7; 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 . If an Unapproved Change in
Control occurs, Executive may 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 WSI or by Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with
Section 8. 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
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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, WSI 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 WSI, 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 WSI as
a result of a Disability, WSI 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
WSI’s insurance programs then in effect.
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