This Employment
Agreement (“Agreement”) is entered into effective
June 30, 2008, by and between Zareba Systems, Inc., a
Minnesota corporation (the “Company”), and Dale
Nordquist, a resident of Minnesota
(“Executive”).
A.
Executive desires to be employed by the Company, and the Company
wishes to hire Executive upon the terms and conditions set forth in
this Agreement. The Company has extended a formal offer of
employment to Executive, subject to the terms of this Agreement, in
a letter dated May 28, 2008 (the “Offer
Letter”).
B.
During employment with the Company Executive will have access to
confidential, proprietary and trade secret information of the
Company. It is desirable and in the best interests of the Company
and its shareholders to protect confidential, proprietary and trade
secret information of the Company, to prevent unfair competition by
former executives of the Company following separation of their
employment with the Company and to secure cooperation from former
executives with respect to matters related to their employment with
the Company.
C.
Executive understands that Executive’s receipt of the
benefits provided for in this Agreement depends on, among other
things, Executive’s willingness to agree to and abide by the
non-disclosure, non-competition, non-solicitation, and other
covenants contained in this Agreement. Executive and the Company
acknowledge that Executive was provided a copy of this Agreement
before Executive accepted employment with the Company.
In consideration
of Executive’s employment with the Company, the compensation
and benefits payable in connection with such employment, and the
foregoing premises and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Executive
and the Company agree as follows:
1.
Employment
. Commencing on
June 30, 2008, or such other date mutually agreed upon by the
parties (the “Effective Date”), the Company will employ
Executive, and Executive will accept such employment and perform
services for the Company, upon the terms and conditions set forth
in this Agreement.
2.
Position and
Duties . While Executive is employed by the Company
during the Term, Executive will have the following position, duties
and responsibilities:
(a)
Position with the Company . Executive will serve as
President and Chief Executive Officer of the Company and will
perform such duties and responsibilities as the Board may assign to
Executive from time to time.
(b)
Performance of Duties and Responsibilities . Executive will
serve the Company faithfully and to the best of Executive’s
ability, devoting full working time, attention, and efforts to the
business of the Company. Executive will report to the Board.
Executive will follow applicable policies and procedures adopted by
the Company from time to time, including without limitation
policies relating to business ethics, conflict of interest,
non-discrimination, confidentiality and protection of trade
secrets, and insider trading. Executive will not engage in other
employment or other material business activity, except as approved
in writing by the Board. It shall not be a violation of this
Agreement for Executive to (i) serve on civic or charitable
boards or committees or (ii) manage personal investments, so
long as such activities do not materially interfere with the
performance of Executive’s responsibilities to the Company.
Executive hereby represents and confirms that Executive is under no
contractual or legal commitments that would prevent Executive from
fulfilling the duties and responsibilities as set forth in or
contemplated by this Agreement.
3.
Compensation .
While Executive is employed by the Company during the Term,
Executive will be provided with the following compensation and
benefits:
(a)
Annual Base Salary . The Company will pay to Executive for
services provided hereunder an Annual Base Salary at a rate
determined from time to time by the Board, which Annual Base Salary
will be paid in accordance with the Company’s normal payroll
policies and procedures. Upon commencement of his employment
hereunder, Executive’s Annual Base Salary will be
$190,000.00.
(b)
Incentive Compensation . Executive will be eligible to
participate in any Company executive management incentive programs
approved by the Board from time to time, in accordance with the
terms and conditions of such programs as may be in effect from time
to time. Executive’s maximum yearly payout for any such
incentive program will be 50% of Executive’s Annual Base
Salary for the fiscal year. For the Company’s fiscal year
ending June 30, 2009, the Company guarantees Executive a
minimum incentive compensation award of $20,000.00, provided
Executive remains continuously employed by the Company through
June 30, 2009.
(c)
Vacation . Executive will be entitled to four weeks of paid
vacation each year, to be accrued and used in accordance with the
Company’s policies as in effect from time to time.
(d)
Employee Benefits . Executive will be entitled to
participate in all employee benefit plans and programs generally
available to executive employees of the Company to the extent that
Executive meets the eligibility requirements for each individual
plan or program. Executive’s participation in any plan or
program will be subject to the provisions, rules, and regulations
of, or applicable to, the plan or program. The Company provides no
assurance as to the adoption or continuation of any particular
employee benefit plan or program.
(e)
Expenses . The Company will reimburse Executive for all
reasonable and necessary out-of-pocket business, travel, and
entertainment expenses incurred by Executive in the performance of
duties and responsibilities to the Company during Executive’s
employment.
Such
reimbursement shall be subject to the Company’s normal
policies and procedures for expense verification, documentation,
and reimbursement. In no event shall any such reimbursement be paid
later than 2 1/2 months after the end of the calendar year in
which the expense was incurred.
(f)
Equity . From time to time the Board in its sole discretion
may grant to Executive stock options, restricted stock or other
equity-based awards, on such terms and conditions as the Board may
provide, subject to applicable plans and agreements to be entered
into relating to such equity-based awards. As of June 2, 2008,
the Company will grant Executive an initial non-qualified option to
purchase 40,000 shares of common stock of the Company, with such
shares vesting in four equal increments on each of the first four
annual anniversaries following the date of the grant. The grant
will be pursuant to the Company’s equity compensation plan
and a definitive non-qualified stock option agreement to be entered
into by and between the Company and Executive.
4.
Termination of
Employment . Executive shall at all times be an employee
at will. The Company may terminate Executive’s employment
with or without Cause at any time, and Executive may resign at any
time, with or without advance notice, subject to the obligations of
the parties under this Agreement.
5.
Payments Upon Involuntary
Termination . If Executive’s Date of Termination
occurs prior to expiration of the Term, and if such separation from
service is involuntary at the initiative of the Company for any
reason (other than Cause or Executive’s death or Disability),
then, in addition to such compensation that has been earned but not
paid to Executive as of the Date of Termination, the Company will
provide to Executive the severance benefits set forth in this
Section 5, subject to the conditions in
Section 6.
(i) The
Company will pay to Executive an amount equal to Executive’s
Annual Base Salary, payable to Executive in equal installments in
accordance with the Company’s regular payroll practices and
schedule over the twelve (12) - month period following the
Date of Termination, provided that:
(A) If the
Date of Termination occurs on or before December 31, 2008, any
amounts that remain payable as of March 15, 2009 shall be
payable in a lump sum on March 15, 2009, with the intention
that the separation pay payable under this Section 5(a)(i)(A)
shall constitute a short-term deferral under Treas. Reg. §
1.409A-1(b)(4); and
(B) If the
Date of Termination occurs after December 31, 2008, then in no
event shall such amount paid under this Section 5(a)(i) exceed
two times the lesser of (x) Executive’s annualized
compensation based upon the annual rate of pay for services to the
Company for the calendar year prior to the calendar year in
which
the Date of
Termination occurs (adjusted for any increase during that year that
was expected to continue indefinitely if Executive had not
separated from service) or (y) the maximum amount that may be
taken into account under a qualified plan pursuant to
Section 401(a)(17) of the Code for the year that includes the
Date of Termination. The separation pay under this
Section 5(a)(i)(B) is intended to constitute a
“separation pay plan due to involuntary separation from
service” under Treas. Reg. §
1.409A-1(b)(9)(iii).
(b)
Continued Benefits . If Executive (and/or Executive’s
covered dependents) is eligible for and properly elects to continue
group medical and/or dental insurance coverage, as in place
immediately prior to the Date of Termination, the Company will
continue to pay the Company’s portion of any such premiums or
costs of coverage until the earlier of (A) twelve
(12) months after the Date of Termination, or (B) the
date Executive (and Executive’s covered dependents) is
provided such form of coverage by a subsequent employer, provided
the Employee remains eligible for continuation coverage and timely
pays the Employee’s portion, if any, of such coverage. All
such Company-provided medical and/or dental insurance premiums, or
costs of coverage, will be paid directly to the insurance carrier
or other provider by the Company and Executive shall make
arrangements with the Company to pay Executive’s portion of
such coverage in an amount equal to such portion that Executive
would pay if actively employed by the Company.
6.
Termination Payment
Conditions . Notwithstanding anything above to the
contrary, the Company will not be obligated to provide any benefits
to Executive under Section 5 hereof unless: (a) Executive
has signed a release of claims in favor of the Company and its
affiliates and related entities, and their directors, officers,
insurers, employees and agents, in a form prescribed by the
Company; (b) all applicable rescission periods provided by law
for releases of claims have expired and Executive has not rescinded
the release of claims; and (c) Executive is in strict compliance
with the terms of this Agreement and any other written agreements
between the Company and Executive as of the dates of such
payments.
7.
Other
Terminations . If Executive’s Date of Termination
occurs:
(a) by
reason of Executive’s abandonment of employment or
resignation from employment for any reason;
(b) by
reason of termination of Executive’s employment by the
Company for Cause;
(c) by
reason of Executive’s death or Disability; or
(d) upon
or following expiration of the Term,
then the
Company will pay to Executive, or Executive’s beneficiary or
Executive’s estate, as the case may be, such compensation
that has been earned but not paid to Executive as of the Date of
Termination, payable pursuant to the Company’s normal payroll
practices and procedures, and
Executive shall
not be entitled to any additional compensation or benefits provided
under this Agreement.
8.
Ventures . If,
during Executive’s employment with the Company, Executive
participates in the planning or implementing of any project,
program, or venture involving the Company, all rights in such
project, program, or venture belong to the Company. Except as
approved in writing by the Board, Executive will not be entitled to
any interest in any such project, program, or venture or to any
commission, finder’s fee, or other compensation in connection
therewith. Executive will have no interest, direct or indirect, in
any customer or supplier that conducts business with the
Company.
9.
Protection of the
Company’s Business .
(a)
Non-Disclosure of Confidential Information . Executive will
not disclose or use at any time, either during or after
Executive’s employment with the Company, any Confidential
Information except for the exclusive benefit of the Company, as
required by Executive’s duties for the Company, or as the
Company may consent to in writing. Executive will cooperate with
the Company to implement reasonable measures to maintain the
secrecy of, and will use Executive’s best efforts to prevent
the unauthorized disclosure, use or reproduction of, all
Confidential Information. In addition to the foregoing, Executive
shall, at all times during or after Executive’s employment
with the Company, comply with such policies and procedures of the
Company as may be adopted from time to time in accordance with
applicable laws and regulations regarding the maintenance,
protection, use and disclosure of Customer Information and shall
not take any action in violation of any such laws or regulations.
Executive further agrees to comply with such additional
requirements regarding Customer Information contained in any
customer agreement to which the Company is a party, to the extent
employee is notified of or otherwise aware of such additional
requirements.
(b)
Covenant Not To Solicit Employees . Executive agrees that
during Executive’s employment with the Company and any
Affiliated Organization and for a period of twelve (12) consecutive
months from Executive’s Date of Termination, whether such
termination is at the initiative of Executive or the Company (with
or without Cause) or occurs before or after expiration of the Term,
Executive will not, directly or indirectly, in any manner or
capacity, including without limitation as a proprietor, principal,
agent, partner, officer, director, stockholder, employee, member of
any association, consultant or otherwise, hire, engage or solicit
any person who is then an employee of the Company or any Affiliated
Organization or who was an employee of the Company or any
Affiliated Organization at the time of Executive’s Date of
Termination. General advertising, by newspaper or other medium, of
an open employment or consulting position will not constitute
solicitation for purposes of this Section 9(b) as long as any
person whom Executive is otherwise precluded from hirin
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