This EMPLOYMENT AGREEMENT (“Agreement”) is entered into effective as of March 1, 2011, by and among Analysts International Corporation, a Minnesota corporation (the “Company”) and Brittany B. McKinney (“Executive”).
The Company and Executive hereby agree that Executive shall serve as the President and Chief Executive Officer (“CEO”) of the Company pursuant to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which the parties hereby acknowledge, the parties agree as follows:
The Company hereby agrees to employ Executive, and Executive, in consideration of such employment and other consideration set forth herein, hereby accepts employment, upon the terms and conditions set forth herein.
2. POSITION AND DUTIES
(a) During the Term of this Agreement, Executive shall be employed as the CEO of the Company, reporting to the Board of Directors. While employed hereunder, Executive shall do all things necessary, legal and incident to the above position, and otherwise shall perform such functions as the Board of Directors (the “Board”) of the Company may establish from time to time. In that capacity, and without limitation, Executive shall perform such duties and responsibilities on behalf of the Company as are customary of the chief executive officer of a publicly traded company of similar size and operations, to a level consistent with the highest standards of one holding such position in similar businesses or enterprises, and agrees not to render services to anyone other than the Company for compensation as an employee or consultant during the term of this Agreement, without prior written consent of the Board.
(b) In the Company’s 2011 proxy statement the Company’s Board of Directors (the “Board”) will also nominate Executive as a candidate for service as a member of the Board for a term of one year beginning on or about May 24, 2011, if so elected by the shareholders at the annual meeting of shareholders to be held on such date. Executive will continue to be a member of the Board until the earlier of: (1) any termination of Executive’s employment with the Company; (2) Executive’s resignation from employment with the Company; (3) Executive’s resignation as a member of the Board; (4) the Board’s failure to nominate Executive for re-election and the subsequent completion of Executive’s term; (5) Executive’s removal as a member of the Board pursuant to Minnesota Statute § 302A.223; or (6) failure of the Company’s shareholders to re-elect Executive to the Board.
(c) Effective as of the date on which Executive is no longer a member of the Board, Executive will be deemed to have resigned from any of its committees and from all boards or other governing bodies (and committees) of each Company subsidiary, if and as applicable, without need of any further action by Executive, the Company, or any Company subsidiary. Notwithstanding the foregoing, Executive agrees to take any action deemed necessary or desirable by the Company or any Company subsidiary to evidence her departure from the Board and such governing bodies and committees.
Unless earlier terminated pursuant to Section 5 hereof, the term of this Agreement (the “Term”) shall commence on March 1, 2011 (the “Effective Date”) and shall continue in effect for one year thereafter (the “Expiration Date”). On the Expiration Date, and on each annual Expiration Date thereafter (each such date being hereinafter referred to as the “Renewal Date”), the term of employment hereunder shall
automatically renew for an additional one (1) year period unless the Company or Executive provide notice in writing to the other at least 90 days prior to the applicable Renewal Date that the Company or Executive as applicable does not wish to renew this Agreement beyond the expiration of the then-current term. Unless waived in writing by the Company, the requirements of Section 5(e) (Return of Property), 6 (Confidentiality) and 9 (Restrictions Against Competition, Etc.) shall survive the expiration or termination of this Agreement for any reason.
4. COMPENSATION AND BENEFITS
(a) Base Salary . During the Employment Period, the Company shall pay Executive an annualized base salary of $325,000.00 (“Base Salary”). The Base Salary shall be payable in cash, subject to applicable withholdings, in accordance with the then-current payment policies of the Company for its executives.
(b) Incentive Compensation Bonus . In addition to Executive’s Base Salary, Executive will be eligible to earn additional cash incentive compensation in the target amount of 50% of Base Salary in each year of employment during the original term or any renewal term (“Incentive Compensation”). The potential Incentive Compensation will be determined annually by the compensation committee of the Board and shall be contingent upon the Company and Executive meeting company and individual performance objectives (“Performance Objectives”) determined by the compensation committee. The compensation committee will consider Executive’s input in setting the annual Performance Objectives. The Executive’s Incentive Compensation Bonus shall be payable in cash, subject to applicable withholdings, within 30 days of the Company’s receipt of its audited financial statements for the relevant fiscal year. The Company will pay Executive’s Incentive Compensation Bonus on April 1 of each calendar year.
(c) Stock Options and Restricted Stock Awards . Simultaneously with executing this Agreement, AIC is also granting Executive 50,000 stock options and 50,000 restricted stock awards as set forth in the Incentive Stock Option Agreement and the Restricted Stock Unit Agreement attached hereto as Exhibits A and B, respectively.
(d) Fringe Benefits . In addition to the Base Salary and payments under any incentive compensation arrangement that are payable hereunder, Executive shall be eligible during the Term for all employee benefits offered to the Company’s senior executives. The Company will also provide Executive the following:
(i) Medical Insurance Costs, Etc. The Company will pay the full cost for family health insurance coverage, including co-pays and deductibles, if any, for Executive. The Company will continue to pay premiums on executive’s existing life insurance policy consistent with its prior practice.
(ii) Paid Time Off . Executive shall be entitled to paid time off at her discretion and as business conditions warrant. If necessary due to business conditions of the Company, Executive agrees to obtain concurrence from the Chairman of the Board prior to taking paid time off of more than five (5) consecutive business days.
(iii) Paid Parking . The Company will provide Executive with a paid indoor parking spot, if available from the building, at the Company’s headquarters office.
(iv) Business Expenses . Executive will be entitled to reimbursement of all reasonable, business-related travel and other expenses incurred by Executive in the ordinary course of business on behalf of the Company, so long as such expenses are incurred, documented and authorized pursuant to the Company’s expense reimbursement policies. Reimbursements will be made in accordance with Company policies, but in no event later than December 31 of the calendar year after the year in which the expense was incurred. Reimbursements in one year will not affect the expenses available for reimbursement in any subsequent year. The right to reimbursement
is not subject to liquidation or exchange for any other benefit.
(e) Insurance Policies . The Company will keep all Directors and Officers insurance policies current and will identify Executive, if appropriate, on all such policies
(a) Death . This Agreement and Executive’s employment thereunder shall be terminated on the death of Executive, effective as of the date of Executive’s death.
(b) Continued Disability . This Agreement and Executive’s employment thereunder may be terminated, at the option of the Company, upon a Continued Disability of Executive, effective as of the date of the determination of Continued Disability as that term is hereinafter defined. For the purposes of this Agreement, “Continued Disability” shall be defined as the inability or incapacity (either mental or physical) of Executive to continue to perform Executive’s duties hereunder for a continuous period of one hundred twenty (120) working days, or if, during any calendar year of the Term hereof because of disability, Executive shall have been unable to perform Executive’s duties hereunder for a total period of one hundred eighty (180) working days regardless of whether or not such days are consecutive. The determination as to whether Executive is unable to perform the essential functions of Executive’s job shall be made by the Board in its reasonable discretion; provided, however , that if Executive is not satisfied with the decision of the Board, Executive will submit to examination by three competent physicians who practice in the metropolitan area in which the Company then resides, one of whom shall be selected by the Company, another of whom shall be selected by Executive, with the third to be selected by the physicians so selected. The decision of a majority of the physicians so selected shall supersede the decision of the Board and shall be final and conclusive.
(c) Termination For Good Cause . Notwithstanding any other provision of this Agreement, the Company may at any time immediately terminate this Agreement and Executive’s employment thereunder for Good Cause. For this purpose, “Good Cause” shall include the following: the current use of illegal drugs; indictment for any crime involving moral turpitude, fraud or misrepresentation; commission of any act which would constitute a felony and which would adversely affect the business or reputation of the Company; fraud; misappropriation or embezzlement of Company funds or property; willful misconduct or grossly negligent or reckless conduct which is materially injurious to the reputation, business or business relationships of the Company; material violation or default on any of the provisions of this Agreement; or material failure to meet reasonable performance criteria or reasonable standards of conduct as established from time to time by the Board, which failure continues for at least 10 days after written notice from the Company to the Executive. Any alleged cause for termination shall be delivered in writing to Executive stating the basis for such cause along with any notice of such termination.
(d) Termination Without Good Cause . The Company may terminate Executive’s employment or elect not to renew this Agreement prior to the Expiration Date at any time, whether or not for Good Cause (as “Good Cause” is defined in Section 5 (c) above). In the event Executive terminates employment pursuant to Section 5(e) below, or the Company terminates Executive or elects not to renew this Agreement for reasons other than Good Cause, Executive’s Death or Executive’s Disability, the Company will pay Executive a lump sum amount equal to the Executive’s Base Salary of $325,000 or such higher base salary as may be in effect as of the date of such separation from employment, which shall be paid as soon as practicable following Executive’s execution (and non-revocation) of a general release of claims in form and substance acceptable to the Board. In such case the Company will also (a) pay Executive the Incentive Compensation Bonus for the then-current fiscal year, prorated over the portion of the fiscal year for which Executive was employed, to the extent accrued as of the date of termination without Cause, and (b) reimburse Executive for medical insurance premium payments made under the Consolidated Omnibus Reconciliation Act (“COBRA”), for a period of up to six (6) months following the date of termination, provided that the Company receives sufficient evidence of proof of such payments during the COBRA period. During such six (6) month period, Executive shall also be entitled to the continuation at Company’s
expense of the then-current Company benefits to the extent continuation of such benefits is expressly provided for under the applicable plans.
(e) Constructive Termination Without Cause . Notwithstanding any other provision of this Agreement, Executive’s employment under this Agreement may be terminated during the Term by Executive, which shall be deemed to be constructive termination by the Company without Cause, if one of the following events shall occur without the written consent of Executive: (i) a material change of the Executive’s functions, duties or responsibilities which change would reduce the ranking or scope of Executive’s position with the Company; (ii) a material reduction in Executive’s Base Salary of $325,000; (iii) the liquidation, dissolution, consolidation or merger of the Company, or transfer of all or substantially all of its assets, other than a transaction in which a successor corporation with a net worth substantially the same as or greater than that of the Company assumes this Agreement and all obligations and undertakings of the Company hereunder; (iv) the notification by the Company of the Company’s intention not to observe or perform one or more of the material obligations of the Company under this Agreement; (v) the failure by the Company to indemnify, pay or reimburse the Executive at the time and under the circumstances required by Section 12(a) of this Agreement; or (vi) the occurrence of any other material breach of this Agreement by the Company or any of its affiliates. Any such termination pursuant to this Section 5(e) shall be made by Executive providing written notice to the Company specifying the event relied upon for such termination and given within thirty (30) days after such event. Any constructive termination pursuant to this Section 5(e) shall be effective thirty (30) days after the date Executive has given the Company such written notice setting forth the grounds for such termination with specificity; provided, however , that Executive shall not be entitled to terminate this Agreement in respect of any of the grounds set forth above if within thirty (30) days after such notice the action constituting such ground for termination has been cured and is no longer continuing.
(f) Resignation . If Executive resigns from her employment (or elects not to renew the Agreement upon its expiration), other than a constructive termination pursuant to Section 5(e) above, the Company will have no further obligation or liability to Executive except such obligation or liability that has accrued through the last date of employment and except as otherwise provided in this Agreement.
(g) Return of Property . Upon any termination of her employment with the Company, Executive agrees to promptly return to the Company: (1) all materials of any kind in Executive’s possession (or under Executive’s control) incorporating Confidential Information or otherwise relating to the Company’s business (including but not limited to all such materials and/or information stored on any computer or other storage device owned or used by Executive); and (2) all Company property in Executive’s possession, including (but not limited to) computers, cellular telephones, pagers, credit cards, keys, records, files, manuals, books, forms, documents, letters, memoranda, data, tables, photographs, video tapes, audio tapes, computer disks and other computer storage media, all materials that include trade secrets, and all copies, summaries or notes of any of the foregoing.
(h) Advice to Prospective Employers . If Executive seeks or is offered employment by any other company, firm or person, she will notify the prospective employer of the existence and terms of the confidentiality and non-competition provisions set forth in Sections 6 and 9 hereof.
(a) Confidential Nature of Relationship . Executive acknowledges that her employment by the Company creates a relationship of confidence and trust with respect to Confidential Information (as hereinafter defined). During the course of her employment with the Company, the Company agrees to provide Executive with access to Confidential Information. Executive expressly undertakes to retain in strict confidence all Confidential Information transmitted or disclosed to Executive by the Company or the Company’s clients, and will never make any use of such information except as (and then, only to the extent) required to perform Executive’s employment duties for the Company. Executive will take such protective measures as may be reasonably necessary to preserve the secrecy and interest of the Company
in the Confidential Information. If Executive becomes aware of any unauthorized use or disclosure of Confidential Information by any person or entity, Executive will promptly and fully advise the Company of all facts known to Executive concerning such unauthorized use or disclosure.
(b) Definition . “Confidential Information” means all confidential or proprietary information and data, in their broadest context, originated by, on behalf of the Company or its clients and within the knowledge or possession of the Company (including any subsidiary, division or legal affiliate thereof). Without in any way limiting the foregoing, Confidential Information includes, but is not limited to: information that has been designated as proprietary and/or confidential; information constituting trade secrets; information of a confidential nature that, by the nature of the circumstances surrounding the disclosure, should in good faith be treated as proprietary and/or confidential; and Company Inventions. Confidential Information also includes information of a confidential nature relating to the Company’s clients, prospective clients, strategic business relationships, products, services, suppliers, personnel, pricing, recruiting strategies, job candidate information, employee information, sales strategies, technology, methods, processes, research, development, systems, techniques, finances, accounting, purchasing and business plans. Without limiting the foregoing, Confidential Information includes the identity of the Company’s customers, subcontractors and employees, mental or written customer lists, customer prospect lists, customer requirements, transactions, work orders, pricing policies and plans.
(c) Exclusions . Confidential Information does not include information which: (1) is generic; (2) is or becomes part of the public domain through no act or omission of Executive; (3) was in Executive’s possession prior to the disclosure and was not obtained by Executive in breach, either directly or indirectly, of any obligation to the Company or any client of the Company’s; (4) is disclosed to Executive by a third party without restriction on disclosure; or (5) is independently developed by Executive using her own resources, entirely on her own time, and without the use of any Confidential Information.
(d) Protected Health Information . If during the course of her employment with the Company, Executive receives any “protected health information” regarding any individual other than Executive, as that term is defined in 45 CFR, Part 164, Subpart E (“Privacy of Individually Identifiable Health Information”): (1) Executive agrees to maintain all such information in strict confidence in accordance with the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA); (2) Executive agrees that she will make no use whatsoever of any such information except as required to perform Executive’s employment duties; and (3) Executive agrees that she will never record, store, file or otherwise maintain, in any computer or other storage device owned by the Company or by Executive, any “protected health information” other than in accordance with Company policy. Executive agrees to alert the Company promptly if she becomes aware of any misuse or unauthorized disclosure of any such information.
(e) Additional Confidentiality Agreements . Executive agrees to execute such additional non-disclosure and confidentiality agreements as the Company’s clients may from time to time request the Company to have its key employees execute in order for the Company to conduct business with its clients.
(f) Independent Development . NOTICE: Pursuant to Minnesota Statutes § 181.78, Executive is hereby notified that the foregoing agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the Company was used and which was developed entirely on the employee’s own time, and (1) which does not relate (a) directly to the business of the Company (or its Client [as such term is defined in Section 9(c)(ii) of this Agreement]) or (b) to the Company’s (or its Client’s) actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the Company or its Client.
7. USE OF CONFIDENTIAL OR MATERIAL NON-PUBLIC INFORMATION ; CODES OF CONDUCT
(a) Confidential or Material, Non-Public Information . Executive acknowledges that she is prohibited from using or sharing any Confidential Information for personal gain or advantage (in securities transactions or otherwise), or for the personal gain or advantage of anyone with whom Executive improperly shares such information. Specifically as to material, non-public information of the Company, Executive agrees to comply during the Term with the Company’s insider trading policy in effect at the commencement of employment and as amended from time to time.
(b) Codes of Conduct . Executive agrees to carefully review, sign and fully comply with any Code of Conduct (or similar policy) of the Company either having general applicability to its employees or specifically to Executive.
8. INTELLECTUAL PROPERTY RIGHTS
All ideas, inventions, discoveries, proprietary information, know-how, processes and other developments and, more specifically improvements to existing inventions, conceived by the Executive, alone or with others, during the term of the Executive’s employment, whether or not during working hours and whether or not while working on a specific project, that are within the scope of the Company’s business operations or that relate to any work or projects of the Company, are and shall remain the exclusive property of the Company. Inventions, improvements and discoveries relating to the business of the Company conceived or made by the Executive, either alone or with others, while employed with the Company are conclusively and irrefutably presumed to have been made during the period of employment and are the sole and exclusive property of the Company. The Executive shall promptly disclose in writing any such matters to the Company but to no other person without the consent of the Company. The Executive hereby assigns and agrees to assign all right, title, and interest in and to such matters to the Company. The Executive will, upon request of the Company, execute such assignments or other instruments and assist the Company in the obtaining, at the Company’s sole expense, of any patents, trademarks or similar protection, if available, in the name of the Company.
9. RESTRICTIONS AGAINST SOLICITATION, INTERFERENCE, COMPETITION AND DISPARAGEMENT
During her employment by the Company and for a period of twelve (12) months after termination of such employment for any reason, Executive agrees that she will not engage in the following conduct.
(a) Restrictions against Solicitation . Executive will not, directly or indirectly, initiate any solicitation or recruitment effort for the purpose of attempting to hire any employee of the Company or to induce any employee of the Company to leave her employment with the Company other than through general solicitation or advertisement not directed at Company employees.
(b) Non-Interference . Executive will not, directly or indirectly, intentionally disrupt, damage, impair, impede or interfere with the contractual relationship between the Company and any of its clients.
(c) Restrictions against Competition .
(i) During the Term of Executive’s employment, whether under this Agreement or at will, and for a period of twelve (12) months after the termination date of Executive’s employment, (whether such termination be with or without Cause), Executive agrees that she will not, directly or indirectly, whether as an employee, agent, consultant, director, officer, investor, partner, shareholder, proprietor, lender or otherwise own, operate or otherwise work for or participate in any Competitive Business; and during such period of time Executive further agrees not to engage in any Competitive Acts with any Client or prospective Client of the Company.
(ii) For purposes of this Section 9, the following terms shall be defined as follows.
“ Competitive Acts ” means soliciting, selling, marketing, brokering, providing or managing any services of the sort that the Company provides to its Clients (“Services”) for any Client, whether directly as an employee of a Client or indirectly as an employee, subcontractor, partner or owner of a Competitor.
“ Client ” means: (A) any client of the Company for whom Executive provided Services at any time during the previous two years of Executive’s employment with the Company; or (B) any client or prospective client of the Company to whom Executive solicited, proposed, marketed or sold Services at any time during the previous two years of Executive’s employment with the Company; and (C) any third party having a written partnership, alliance or teaming agreement or similar strategic business relationship with the Company.
“ Competitor ” means any third party offering technical consulting services within the United States that compete with the Company or are similar in kind or nature to the services provided by the Company while Executive is employed by the Company.
“ Competitive Business ” means any competitive business, anywhere in the world, which provides, develops, manages or markets any product or service that in any way competes with the Company’s business, products or services as conducted, or planned to be conducted, on the date of Executive’s termination of employment.
(iii) The foregoing restrictions against competition shall not, however, prohibit Executive from owning not more than 5% of the outstanding stock of a corporation subject to the reporting requirements of the Securities Exchange Act of 1934.
(d) Non-Disparagement . Executive agrees not to engage in any form of conduct or make any statements or representations to current or prospective customers of the Company, media outlets, employees or management of a corporation or business in direct competition with the Company, or otherwise publish statements or representations to the public at large (1) which may be actionable, (2) that disparag