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Exhibit 10.27
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective as of
December 16, 2008
(the "Effective Date), is made and entered into by and between
Clearfield, Inc.,
a Minnesota corporation (hereinafter referred to as the
"Company") and John P.
Hill (the "Executive").
WHEREAS, the Company desires to employ the Executive and the
Executive
desires to accept employment with the Company, upon the terms
and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and other good
and
valuable consideration, the receipt of which is hereby
acknowledged, the parties
hereto agree as follows:
1. Employment and Employment Period
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The Company agrees to employ the Executive and the Executive
agrees to
accept such employment upon the terms and conditions set forth
herein. Subject
to the provisions for earlier termination hereinafter provided,
the Executive's
employment hereunder shall be for a term (the "Employment
Period") commencing on
the Effective Date and ending on the third anniversary of the
Effective Date
(the "Initial Termination Date"); provided, however, that this
Agreement shall
be automatically extended for one additional year on the Initial
Termination
Date and on each subsequent anniversary of the Initial
Termination Date unless
either the Executive or the Company elects not to so extend the
term of the
Agreement by notifying the other party, in writing, of such
election not less
than sixty (60) days prior to the last day of the term then in
effect.
2. Terms of Employment
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(a) Position and Duties.
(i) During the Employment Period, the Executive shall serve
as Chief Operating Officer and shall perform such employment
duties as are usual
and customary for such positions. During the Employment Period,
the Executive
shall be a member of the Executive Management Committee of the
Company, and the
Executive shall report directly to the Board of Directors of the
Company (the
"Board") or its designee. The Executive Management Committee
shall, as a group,
review and consider all major business policies, strategies and
initiatives of
the Company and its affiliates. The Executive shall be officed
at the Company's
main headquarters offices in Plymouth, Minnesota; provided,
however, that the
Executive understands that travel will be a required component
of the position.
At the Company's request, the Executive shall serve the Company
and/or its
subsidiaries and affiliates in other positions and capacities in
addition to the
foregoing. In the event that the Executive, during the
Employment Period, serves
in any one or more of such additional capacities, the
Executive's compensation
may (or may not) be increased beyond that specified in Section
2(b) of this
Agreement, in the Company's sole discretion. In addition, in the
event the
Executive's service in one or more of such additional capacities
is subsequently
terminated, the Executive's compensation, as specified in
Section 2(b) of this
Agreement, shall not be diminished or reduced in any manner as a
result of such
termination for so long as the Executive otherwise remains
employed under the
terms of this Agreement.
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(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled,
the Executive
agrees to devote substantially all of his business time, energy,
skills and best
efforts to the performance of his duties hereunder in a manner
that will
faithfully and diligently further the business and interests of
the Company.
Notwithstanding the foregoing, during the Employment Period it
shall not be a
violation of this Agreement for the Executive to (A) serve on
civic, charitable
or other boards or committees; provided, however, that the
Executive will
consult with the Chairman of the Board prior to accepting a
position on the
board of any publicly traded company; (B) deliver lectures,
fulfill speaking
engagements or teach at educational institutions; or (C) manage
his personal
investments, so long as such activities do not materially
interfere with the
performance of the Executive's responsibilities as an executive
officer of the
Company.
(iii) The Executive agrees that he will not take personal
advantage of any business opportunity that arises during his
employment by the
Company and which may be of benefit to the Company unless all
material facts
regarding such opportunity are timely reported by the Executive
to the Board for
consideration by the Company and the disinterested members of
the Board
determine to reject the opportunity and to approve the
Executive's participation
therein.
(b) Compensation, Benefits, Equity Grants.
(i) Base Salary. During the Employment Period, the Executive
shall receive a base salary of $170,000 per annum (the "Base
Salary"), as the
same may be increased thereafter (or thereafter decreased, but
not below the
initial Base Salary) pursuant to the Company's normal practices
for its
executives. The Base Salary shall be paid at such intervals as
the Company
customarily pays executive salaries. During the Employment
Period, the Base
Salary shall be reviewed at least annually for possible increase
(or decrease,
but not below the initial Base Salary), as determined by the
Company's
compensation committee, in its sole discretion. Any increase in
Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under
this Agreement. The term "Base Salary" as utilized in this
Agreement shall refer
to Base Salary as so adjusted.
(ii) Annual Bonus. In addition to the Base Salary, the
Executive shall be eligible to earn, for each fiscal year of the
Company ending
during the Employment Period, an annual cash performance bonus
(an "Annual
Bonus"). The amount of the Annual Bonus and the target
performance goals
applicable to the Annual Bonus shall be determined in accordance
with the terms
and conditions of said bonus plan as in effect from time to
time; provided that
Executive's target for each Annual Bonus hereunder shall be 40%
of Base Salary
for that year, and his maximum Annual Bonus shall be 150% of
Base Salary for
that year. The terms and conditions of any such bonus plan shall
be determined
by the Company's compensation committee of the Board in its sole
discretion.
(iii) Sign-On Bonus. The Executive shall receive a sign-on
bonus in the amount of $2,000 within fifteen (15) days of the
Effective
Date as additional consideration for the Executive's agreement
to the terms
and conditions herein and his execution of this Agreement.
(iv) Welfare Benefit Plans. During the Employment Period,
the Executive and the Executive's eligible family members shall
be eligible to
participate in the welfare benefit plans, practices, policies
and programs
(including, if applicable, medical, dental, disability, employee
life, group
life and accidental death insurance plans and programs)
maintained by the
Company for its senior executives.
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(v) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all
reasonable business
expenses incurred by the Executive in accordance with the
policies, practices
and procedures of the Company provided to senior executives of
the Company.
(vi) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to receive such fringe benefits and
perquisites as
are provided by the Company to its senior executives from time
to time, in
accordance with the policies, practices and procedures of the
Company.
(vii) Vacation. During the Employment Period, the Executive
shall be entitled to receive paid vacation in accordance with
the plans,
policies, programs and practices of the Company applicable to
its senior
executives.
3. Termination of Employment
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(a) The Executive's employment shall continue from the Effective
Date
until it is terminated by the Company or the Executive in
accordance with the
terms of this Agreement.
(b) Death. The Executive's employment will terminate
automatically upon
the Executive's death.
(c) Disability. To the extent consistent with federal and state
laws,
Executive's employment may be terminated if Executive suffers a
Disability. For
purposes of this Agreement, "Disability" means a physical or
mental illness
which renders Executive unable to perform his essential duties
for ninety (90)
consecutive days or a total of one hundred and eighty (180) days
in any twelve
(12) month period with or without reasonable accommodations, or
unable to
perform those duties in a manner that would not endanger his
health or safety or
the health or safety of others even with reasonable
accommodations. The
existence of a Disability shall be determined through the
opinion (to a
reasonable medical certainty) of an independent physician
selected by the
Company or its insurers and reasonably acceptable to the
Executive or the
Executive's legal representative. The Company is not, however,
required to make
unreasonable accommodations for Executive or accommodations that
would create an
undue hardship for the Company
(d) Cause. The Company may terminate the Executive's employment
during
the Employment Period for Cause or without Cause. For the
purposes of this
Agreement, "Cause" shall mean the occurrence of any one or more
of the following
events:
(i) The Executive's willful failure to perform or gross
negligence in performing his duties owed to the Company (other
than
such failure resulting from the Executive's Disability or any
such
actual failure after his issuance of a Notice of Termination for
Good
Reason), which continues after thirty (30) days following a
written
notice delivered to the Executive by the Board, which notice
specifies
such willful failure or gross negligence;
(ii) The Executive's commission of an act of fraud or
dishonesty in the performance of his duties;
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(iii) The Executive's conviction of, or entry by the
Executive
of a guilty or no contest plea to, any felony or a misdemeanor
involving moral
turpitude;
(iv) Any material breach by the Executive of any fiduciary
duty or duty of loyalty owed to the Company; or
(v) The Executive's material breach of any of the provisions
of this Agreement which is not cured within thirty (30) days
following written
notice thereof from the Company.
(e) Good Reason. The Executive's employment may be terminated by
the
Executive for Good Reason or by the Executive without Good
Reason. For purposes
of this Agreement, "Good Reason" shall mean the occurrence of
any one or more of
the following events without the Executive's prior written
consent, provided
that the Executive terminates his employment within one hundred
and eighty (180)
days following the lapse of the Company's cure period described
below as to one
or more of such events and unless the Company fully corrects the
circumstances
constituting Good Reason (provided such circumstances are
capable of correction)
prior to the Date of Termination:
(i) The Company's reduction of the Executive's annual base
salary below the initial Base Salary or reduction in the
Executive's target
annual bonus;
(ii) The Company's material change of the Executive's duties
in a manner inconsistent with the Executive's position,
authority, duties or
responsibilities as contemplated by Section 2(a) or other action
by the Company
which materially diminishes such position, authority, duties
or
responsibilities, excluding for this purpose isolated,
insubstantial or
inadvertent action not taken in bad faith and which is remedied
by the Company
promptly after receipt of notice thereof from Executive;
(iii) The relocation of the Company's offices at which
Executive is principally employed to a location more than 50
miles from such
offices;
(iv) The failure of a successor to the Company to (A) assume
and agree to perform the obligations of the Company hereunder,
or (B) replace
this Agreement with an employment contract of substantially
similar terms
acceptable to the Executive and no less favorable than those
terms provided to
an acquiring Company's executive officers; or
(v) The Company's material breach of its obligations under
the
Agreement.
Notwithstanding any other provision of this Section 3(e), the
occurrence
of any event described in Section 3(e)(i) or (v) shall
constitute Good Reason
only if (A) the Executive provides written notice to the Company
of the
occurrence of such event within ninety (90) days of the initial
occurrence of
such event, and (B) the Company fails to remedy the event
described in the
Executive's written notice within thirty (30) days of the
Company's receipt of
such notice.
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(f) Notice of Termination. Any termination by the Company for
Cause,
or by the Executive for Good Reason, shall be communicated by
Notice of
Termination to the other party hereto given in accordance with
Section 12(c) of
this Agreement. For purposes of this Agreement, a "Notice of
Termination" means
a written notice which (i) indicates the specific termination
provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth
in reasonable
detail the facts and circumstances claimed to provide a basis
for termination of
the Executive's employment under the provision so indicated, and
(iii) specifies
the Date of Termination (which date shall be not less than
thirty (30) days
after the giving of such notice). The failure by the Executive
or the Company to
set forth in the Notice of Termination any fact or circumstance
which
contributes to a showing of Good Reason or Cause shall not waive
any right of
the Executive or the Company, respectively, hereunder or
preclude the Executive
or the Company, respectively, from asserting such fact or
circumstance in
enforcing the Executive's or the Company's rights hereunder.
4. Obligations of the Company Upon Termination
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(a) Without Cause, For Good Reason or The Company's
Non-Renewal.
If, during the Employment Period, the Company shall terminate
the Executive's
employment without Cause, the Executive shall terminate his
employment for Good
Reason, or the Company elects not to extend the term of this
Agreement in
accordance with Section 1, then the Executive will receive those
payments and
benefits set forth below. The timing of the payments hereunder
is subject to
Section 12(e) hereof:
(i) The Executive shall be paid, in two lump sum payments
(A) the Executive's earned but unpaid Base Salary and accrued
but unpaid
vacation pay through the Date of Termination, and any Annual
Bonus required to
be paid to the Executive pursuant to Section 2(b)(ii) above for
any fiscal year
of the Company that ends on or before the Date of Termination to
the extent not
previously paid (the "Accrued Obligations"), and (B) an amount
(the "Severance
Amount") equal to two (2) times the sum of (1) the Base Salary
in effect on the
Date of Termination, plus (2) the average Annual Bonus received
by the Executive
for the three (3) complete fiscal years as the Chief Executive
Officer (or such
lesser number of years as the Executive has been employed as the
Chief Executive
Officer) of the Company immediately prior to the Date of
Termination;
(ii) At the time annual bonuses are paid to the Company's
other senior executives for the fiscal year of the Company in
which the Date of
Termination occurs, the Executive shall be paid an Annual Bonus
in an amount
equal to the product of (A) the amount of the Annual Bonus to
which the
Executive would have been entitled if the Executive's employment
had not been
terminated, and (B) a fraction, the numerator of which is the
number of days in
such fiscal year through the Date of Termination and the
denominator of which is
the total number of days in such fiscal year (a "Pro-Rated
Annual Bonus");
(iii) If Executive (or any of Executive's qualified
beneficiaries) makes a timely election to continue to
participate in the
Company's group health plans (medical, dental, and vision)
pursuant to 29 U.S.C.
ss.ss. 1161-1169 ("COBRA"), the Company shall pay the premium
for such coverage
(which premium payment shall be taxable to Executive if the
Company's group
health plans are self-insured) starting on the Date of
Termination and ending on
the earlier of (A) the date that is one (1) year after the Date
of Termination,
or (B) the date on which Executive no longer is eligible to
continue to
participate under COBRA. For purposes of the foregoing, the
usual limitations of
COBRA shall apply and the Company's payment of the COBRA
premium(s) shall not
extend the continuation period, which begins on the Date of
Termination;
(iv) Any unvested stock options shall become immediately
vested in full; and
(v) To the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any vested
benefits and
other amounts or benefits required to be paid or provided or
which the Executive
is eligible to receive as of the Date of Termination under any
plan, contract or
agreement of the Company and its affiliates (such other amounts
and benefits
shall be hereinafter referred to as the "Other Benefits") to
which the Executive
is a party.
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Notwithstanding anything to the contrary in this Section 4, it
shall be a
condition to the Executive's right to receive the amounts
provided for above
that the Executive execute, deliver to the Company and not
revoke a release of
claims in substantially the form attached hereto as Exhibit
A.
(b) For Cause or Without Good Reason. If the Executive's
employment
shall be terminated by the Company for Cause or by the Executive
without Good
Reason during the Employment Period, the Company shall have no
further
obligations to the Executive under this Agreement other than
pursuant to
Sections 6 and 7 hereof, and the obligation to pay to the
Executive the Accrued
Obligations when due under Minnesota law and to provide the
Other Benefits in
accordance with the provisions of the applicable plan, program,
agreement and/or
law.
(c) Death or Disability. If the Executive's employment is
terminated
by reason of the Executive's Death or Disability during the
Employment Period:
(i) The Accrued Obligations shall be paid to the Executive's
estate or beneficiaries or to the Executive, as applicable, in a
lump-sum cash
payment when due under Minnesota law;
(ii) 100% of the Executive's then current annual Base
Salary, as in effect on the Date of Termination, shall be paid
to the
Executive's estate or beneficiaries or the Executive, as
applicable, in a
lump-sum cash payment within twenty (20) days following the Date
of Termination;
(iii) The Pro-Rated Annual Bonus shall be paid to the
Executive's estate or beneficiaries or to the Executive, as
applicable, at the
time when annual bonuses are paid to the Company's other senior
executives for
the fiscal year of the Company in which the Date of Termination
occurs;
(iv) If any of the Executive's qualified beneficiaries makes
a timely election to continue to participate in the Company's
group health plans
pursuant to COBRA, the Company shall pay the premium for such
coverage (which
premium payment shall be taxable to Executive if the Company's
group health
plans are self-insured) starting on the Date of Termination and
ending on the
earlier of (A) the date that is one (1) year after the Date of
Termination, or
(B) the date on which the Executive's qualified beneficiary no
longer is
eligible t
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