Exhibit 10.5
TENNANT COMPANY
EXECUTIVE EMPLOYMENT AGREEMENT
THIS
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is
entered into on ______ __, 2006 by and between Tennant Company, a
Minnesota corporation (the “Company”), and
*[_________________________]*, a resident of *[______________]*
(“Executive”).
Recitals
A.
The Company and Executive are parties to an Amended and Restated
Management Agreement between them dated as of
*[________________, 200_]* (the “Prior
Agreement”).
B.
In October 2004, the American Jobs Creation Act of 2004 (the
“Act”) was enacted, Section 885 of which Act added new
provisions to the Internal Revenue Code pertaining to deferred
compensation.
C.
The Treasury Department has issued transition guidance, revised
transition guidance and proposed regulations regarding the deferred
compensation provisions of the Act, which permit service providers
and service recipients a transition period to modify existing
deferred compensation arrangements to bring them in compliance with
the Act.
D.
The parties agree that it is in their mutual best interests to
modify and clarify the terms and conditions of the Prior Agreement,
as set forth in this Agreement and in that certain Management
Agreement of even date herewith, with the full intention of
complying with the Act so as to avoid the excise taxes and
penalties imposed under the Act.
E.
Executive is a key member of the management of the Company and is
expected to devote substantial skill and effort to the affairs of
the Company, and the Company desires to recognize the significant
personal contribution that Executive makes and is expected to
continue to make to further the best interests of the Company and
its shareholders.
F.
It is desirable and in the best interests of the Company and its
shareholders to continue to obtain the benefits of
Executive’s services and attention to the affairs of the
Company.
G.
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.
NOW,
THEREFORE, in consideration of the foregoing premises and the
respective agreements of the Company and Executive set forth below,
the Company and Executive, intending to be legally bound, agree as
follows:
1.
Term . This Agreement shall commence on the date
of this Agreement and shall continue in effect until *[December 31,
2008]*. Thereafter, this Agreement shall be automatically extended
for successive one-year periods, unless either party gives written
notice to the other party at least 60 days prior to the expiration
of such period that such party elects not to extend the term. The
initial term of this Agreement and each successive extension period
shall be referred to as the “Term” of this Agreement.
During the Term, the Company shall employ Executive, and Executive
shall remain in the employ of the Company, upon the terms and
conditions set forth in this Agreement, until such employment is
terminated in accordance with Section 4 below. Following expiration
of the Term after notice of non-renewal, if Executive then remains
employed by the Company such continued employment shall be on such
terms and conditions as may be agreed to from time to time by the
parties.
2.
Position and Duties .
(a)
Employment with the Company . During
Executive’s employment with the Company hereunder, Executive
shall initially hold the position of *[title]* and shall assume
such additional or alternative positions of an executive nature,
and shall perform such duties and responsibilities associated with
such positions, as *[the Chief Executive Officer of the Company
or the Board]* shall assign to Executive from time to time
consistent with Executive’s qualifications and
experience.
(b)
Performance of Duties and Responsibilities .
Executive shall serve the Company faithfully and to the
best of Executive’s ability and shall devote full working
time, attention and efforts to the business of the Company during
Executive’s employment with the Company. While Executive is
employed by the Company hereunder, Executive shall not accept other
employment with or engage in or render services to any other
business enterprise, except that Executive may participate in
charitable activities and personal investment activities to a
reasonable extent, and Executive may serve as a director of
business organizations subject to any guidelines for such
directorships that may be established by the Company from time to
time, so long as such activities and directorships do not interfere
with the performance of Executive’s duties and
responsibilities to the Company. Executive hereby represents and
confirms that Executive is under no contractual or legal
commitments that would prevent Executive from fulfilling
Executive’s duties and responsibilities as set forth in this
Agreement.
3.
Compensation .
(a)
Base Salary . While Executive is employed by the
Company hereunder, the Company shall pay to Executive on an annual
basis such Base Salary as the Board and/or the Compensation
Committee shall from time to time determine, prorated for any
partial year of employment, payable in accordance with the
Company’s normal payroll policies and procedures. At the
beginning of each fiscal year of Executive’s employment with
the Company during the Term, the Board and/or the Compensation
Committee shall conduct an annual review of Executive’s
performance and Base Salary to determine whether an adjustment to
Executive’s Base Salary should be made. In no event shall
Executive’s Base Salary be decreased in any fiscal year
during the Term by more than 15% of the Base Salary paid to
Executive for the immediately preceding fiscal year.
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(b)
Incentive Compensation . While Executive is
employed by the Company hereunder, Executive shall be entitled to
participate in the STIP, subject to the terms of such plan and as
such plan may be amended from time to time.
(c)
Employee Benefits . While Executive is employed
by the Company hereunder, the Company shall provide to Executive
and Executive’s dependents such medical, dental and life
insurance and disability, retirement savings, vacation, sick leave
and other employee and fringe benefits as are provided from time to
time by the Company to its senior executives and their dependents,
in accordance with the general benefits practices of and the
eligibility and other terms and conditions of the applicable
benefit plans and programs of the Company then in
effect.
(d)
Expenses . While Executive is employed by the
Company hereunder, the Company shall reimburse Executive for all
reasonable and necessary out-of-pocket business, travel and
entertainment expenses incurred by Executive in the performance of
Executive’s duties and responsibilities hereunder, subject to
the Company’s normal policies and procedures for expense
verification and documentation.
4.
Termination of Employment . The
Executive’s employment with the Company hereunder shall
terminate and be effective:
(a)
on the date set forth in a written notice from the Company to
Executive of the termination of Executive’s employment, which
date shall be at least three business days following the date of
such notice;
(b)
upon Executive’s abandonment of employment;
(c)
upon receipt by the Company of written notice from Executive of
Executive’s resignation;
(d)
upon Executive’s Disability; or
(e)
upon Executive’s death.
Any notice pursuant to Section
4(a) or 4(c) shall, as applicable, specify whether such termination
by the Company is with or without Cause, or resignation by
Executive is with or without Good Reason, and, if with Cause or
Good Reason, shall set forth in reasonable detail the basis
therefor. Upon Termination of Employment, Executive shall receive,
in addition to any amounts owed pursuant to Sections 5 or 6 of this
Agreement, any Base Salary, earned and unused vacation time, and
STIP for the preceding year, to the extent such amounts are earned
but unpaid as of the Termination Date, in accordance with the
Company’s payroll practices and any applicable plans or
programs.
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5.
Payments upon Involuntary Termination of Employment .
If Executive’s employment terminates during the
Term by reason of an Involuntary Termination by the Company without
Cause, the Company shall provide to Executive the benefits set
forth in Sections 5(a) and 5(c) below, as applicable, subject to
the limitations and conditions in Sections 5(b) and 8:
(a)
Severance Benefits . If Executive’s
employment terminates during the Term by reason of an Involuntary
Termination by the Company without Cause, then:
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(i) The Company
shall pay to Executive, in accordance with the Company’s
regular payroll practices, Executive’s then-current Base
Salary for a period of 12 consecutive months after the Termination
Date.
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(ii) If the
Termination Date is any day other than the last day of the STIP
plan year, the Company shall pay to Executive the full amount of
the award that would have been payable to Executive under the STIP
for such plan year had all performance targets been met and the
Executive remained employed by the Company until the end of the
plan year. The payment shall be made no later than the date awards
under the STIP for such plan year are or would have been paid to
the participants in the STIP.
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(iii) If Executive
(and/or Executive’s covered dependents) is eligible and
properly elects under COBRA to continue group medical and/or dental
insurance coverage, as in place immediately prior to the
Termination Date, the Company shall continue to pay the
Company’s portion of any such premiums or costs of coverage
for a period of up to 12 months following the Termination Date. The
Company will stop paying its portion of the medical and/or dental
insurance premiums, as applicable, prior to the end of the 12-month
period if Executive (and Executive’s covered dependents) is
no longer eligible for COBRA coverage or is provided essentially
equivalent and no less favorable benefits by a subsequent employer.
All Company-provided medical and/or dental premiums under this
Section 5(a)(iii) shall be paid directly to the insurance carrier
or other provider.
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(iv) If Executive
is eligible under COBRA to continue group life insurance coverage,
as in place immediately prior to the Termination Date, if any, the
Company shall pay to Executive an additional cash payment equal to
the Company’s monthly portion of any such premiums or costs
of coverage, as in effect on the Termination Date, times twelve
(12). The payment shall be made to Executive as soon as
administratively practicable after the Termination Date.
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(b)
Limitations . Notwithstanding anything above to
the contrary, the benefits payable to Executive under Sections
5(a)(i), (ii) and (iv) shall not exceed two times the lesser
of:
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(i) The Code
§ 401(a)(17) compensation limit for the year in which the
Termination Date occurs; or
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(ii)
Executive’s annual compensation (as defined in Treas. Reg.
§ 1.415-2(d)) for services to the Company for the calendar
year prior to the calendar year in which the Termination Date
occurs.
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The Company and Executive intend
these Sections 5(a) and 5(b) to be a “separation pay plan due
to involuntary separation from service” under Prop. Treas.
Reg. §1.409A-1(b)(9)(iii) (or subsequent guidance). The
parties further intend that the Company’s payments of medical
and dental premiums or costs under Section 5(a)(iii) will not be
considered a deferral of compensation by application of Prop.
Treas. Reg. § 1.409A-1(b)(9)(iv) (or subsequent
guidance).
(c)
Additional Payments . Any benefits or payments
otherwise due under Section 5(a), which were reduced or limited
under Section 5(b), shall be paid to Executive on the later of the
payment date specified under Section 5(a) or the first day of the
seventh month following the Termination Date.
6.
Payments in the Case of Other Terminations . If
Executive’s employment terminates during the Term and if
Section 5 does not apply, then Executive shall be entitled to the
following, as applicable:
(a)
Death or Disability . If Executive’s
Termination of Employment is due to Executive’s death or
Disability, the Company shall pay to Executive (or
Executive’s legal representative), in accordance with the
Company’s regular payroll practices, Executive’s
current Base Salary through and including the last day of the
calendar month in which the Termination Date occurs.
(b)
Termination for Good Reason . If
Executive’s Termination of Employment is due to the
Executive’s resignation for Good Reason, then the Company
shall provide to Executive the benefits set forth in this Section
6(b), subject to the limitations and conditions in Section
8:
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(i)
The Company shall pay to Executive
an amount equal to one (1) times Executive’s then-current
Base Salary. One-half of this payment will be paid to Executive on
the first day of the seventh month following the Termination Date.
The remaining amount shall be paid to Executive in equal
installments for six months thereafter, in accordance with the
Company’s regular payroll practices.
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(ii) If the
Termination Date is any day other than the last day of the STIP
plan year, the Company shall pay to Executive the full amount of
the award that would have been payable to Executive under the STIP
for such plan year had all performance targets been met and
Executive remained employed by the Company until the end of the
plan year. The payment shall be made on the later of:
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(A) The date
awards under the STIP for such plan year are or would have been
paid to the participants in the STIP, or
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(B)
The first day of the seventh month following Executive’s
Termination Date.
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(iii) If Executive
(and/or Executive’s covered dependents) is eligible and
properly elects under COBRA to continue group medical and/or dental
insurance coverage, as in place immediately prior to the
Termination Date, the Company shall continue to pay the
Company’s portion of any such premiums or costs of coverage
for a period of up to 12 months following the Termination Date. The
Company will stop paying its portion of the medical and/or dental
insurance premiums, as applicable, prior to the end of the 12-month
period if Executive (and Executive’s covered dependents) is
no longer eligible for COBRA coverage or is provided essentially
equivalent and no less favorable benefits by a subsequent employer.
All Company-provided medical and/or dental premiums under this
Section 6(b)(iii) shall be paid directly to the insurance carrier
or other provider.
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(iv) If Executive
is eligible under COBRA to continue group life insurance coverage,
as in place immediately prior to the Termination Date, if any, the
Company shall pay to Executive an additional cash payment equal to
the Company’s monthly portion of any such premiums or costs
of coverage, as in effect on the Termination Date, times twelve
(12). The payment shall be paid to Executive on the first day of
the seventh month following the Termination Date.
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7.
Other Agreements .
(a)
Employee Agreement . At the same time as they
sign this Agreement, the parties are entering into the Employee
Agreement attached hereto as Exhibit A.
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(b)
Management Agreement . At the same time as they
sign this Agreement, the parties are entering into the Management
Agreement attached hereto as Exhibit B.
8.
Withholding of Taxes, Other Limitations.
(a)
Taxes . All payments to Executive hereunder are
subject to withholding of income and employment taxes and all other
amounts required by law.
(b)
Offsets . Notwithstanding any other provision of
this Agreement, any payments required by Section 5 or Section 6(b)
shall be reduced by any severance pay that Executive is eligible to
receive from the Company, its subsidiaries or its successors under
any policy, plan or agreement of the Company, other than this
Agreement, in the event of the Company’s termination of
Executive’s employment with the Company.
(c)
Release Requirement . Notwithstanding any other
provision of this Agreement, the Company shall not be obligated to
make any payments to Executive under Sections 5(a), 5(c) or 6(b)
hereof unless Executive shall have signed a release of claims in
favor of the Company in a form to be prescribed by the Company, all
applicable consideration periods and rescission periods provided by
law shall have expired and Executive is in strict compliance with
the terms of this Agreement and the Employee Agreement as of the
dates of the payments.
(d)
Effect of Management Agreement . Notwithstanding
any other provisions of this Agreement, if a Termination of
Employment occurs during the Transition Period (as defined in the
Management Agreement), Executive shall not be entitled to receive
any compensation or benefits under Sections 5(a), 5(c) or 6(b)
above, but shall be entitled to compensation and benefits, if any,
pursuant to the Management Agreement.
(e)
Code Section 409A . This Agreement is intended
to satisfy, or otherwise be exempt from, the requirements of Code
§ 409A(a)(2), (3) and (4), including current and future
guidance and regulations interpreting such provisions. To the
extent that any provision of this Agreement fails to satisfy those
requirements, or fails to be exempt from Code § 409A, the
provision shall automatically be modified in a manner that, in the
good-faith opinion of the Company, brings the provisions into
compliance with those requirements while preserving as closely as
possible the original intent of the provision and this
Agreement.
(f)
No Mitigation . Executive shall not be required
to mitigate the amount of any payment or other benefit provided for
in Section 5 or Section 6 by seeking employment with
another employer or otherwise; nor shall the amount of any payment
or other benefit provided for in Section 5 or 6 be reduced by
any compensation earned by Executive as the result of
Executive’s subsequent employment by another employer, except
as otherwise expressly provided in this Agreement.
9.
Return of Property . Upon termination of
Executive’s employment with the Company, Executive shall
promptly deliver to the Company any and all Company records and any
and all Company property in Executive’s possession or under
Executive’s control, including without limitation manuals,
books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, printouts, computer disks, computer tapes,
electronic media, source codes, data, tables or calculations and
all copies thereof, documents that in whole or in part contain any
trade secrets or confidential, proprietary or other secret
information of the Company and all copies thereof, and keys, access
cards, access codes, passwords, credit cards, computers, telephones
and other electronic equipment belonging to the Company.
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10.
Directors’ and Officers’ Indemnification; Stock
Based Compensation . While Executive is employed by
the Company hereunder, the Company shall not, without the prior
written consent of Executive, amend its articles of incorporation
or by-laws to prohibit or limit the indemnification of, or advances
of expenses to, its directors and officers or to impose conditions
on such indemnification or advances of expenses in addition to
those provided by law. While Executive is employed by the Company
hereunder, the Company shall not modify any stock based incentive
plan or agreement to which Executive is a party (or is subject) to
limit or otherwise affect the acceleration of vesting or
exercisability of stock options of Executive in the event of a
change in control, the lapse of restrictions on restricted stock of
Executive in the event of a change in control, or any other
acceleration of, or increase in benefits under, any stock based
benefit in the event of a change in control.
11.
Definitions . When used in this Agreement with
initial capitalized letters, the following terms have the meanings
indicated below, unless context requires otherwise:
(a)
Base Salary . “Base Salary” means
Executive’s annual base salary established by the Board
and/or Compensation Committee in accordance with Section
3(a).
(b)
Board . “Board” means the Board of
Directors of the Company.
(c)
Cause . “Cause” means:
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(i)
Executive’s material breach of this Agreement, which is not
remedied within 30 days after receipt of written notice
thereof;
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(ii) an act or acts of
dishonesty undertaken by Executive and intended to result in gain
or personal enrichment of Executive at the expense of the
Company;
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(iii)
persistent failure by Executive to perform the
duties of Executive’s employment, which failure is
demonstrably willful and deliberate on the part of Executive and
constitutes gross neglect of duties by Executive and which is not
remedied within 90 days after receipt of written notice thereof;
or
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(iv) the indictment or
conviction of Executive for a felony if the act or acts
constituting the felony are substantially detrimental to the
Company or its reputation.
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(d)
COBRA . “COBRA” means the benefit
continuation provisions under the Consolidated Omnibus Budget
Reconciliation Act of 1986. For purposes of this Agreement, COBRA
is deemed to include the group term life insurance continuation
requirements under Minnesota law.
(e)
Code . “Code” means the Internal
Revenue Code of 1986, as amended.
(f)
Compensation Committee . “Compensation
Committee” means the compensation committee of the
Board.
(g)
Disability . “Disability” means a
continuing condition of Executive that has been determined to meet
the criteria set forth in the Company’s *[Long Term
Disability Plan], or similar successor plan, to render Executive
eligible for long-term disability benefits under said plan, whether
or not Executive is in fact covered by such plan. The determination
shall be made by the insurer of the plan or, if Executive is not
covered by the plan, by the Company in its sole
discretion.
(h)
Employee Agreement . “Employee
Agreement” means the Employee Agreement between Executive and
the Company of even date herewith and attached to this Agreement as
Exhibit B.
(i)
Good Reason . “Good Reason”
means:
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(i) the
Company’s material breach of this Agreement which is not
remedied within 30 days after receipt of written notice thereof;
or
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(ii) the
assignment to Executive, without Executive’s written consent,
of duties and responsibilities that are substantially inconsistent
with, or materially diminish, Executive’s position with the
Company other than for Cause or on account of
Disability.
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(j)
Involuntary Termination . “Involuntary
Termination” means a Termination of Employment instigated by
the Company without the consent or agreement of Executive, or which
is otherwise considered an involuntary separation from service
under Code § 409A or guidance thereunder.
(k)
Management Agreement . “Management
Agreement” means the Management Agreement between Executive
and the Company of even date herewith and attached to this
Agreement as Exhibit B.
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(l)
STIP . “STIP” means the
Company’s Short-Term Incentive Plan, as amended, or any
successor plan.
(m)
Termination Date . “Termination
Date” means the date on which Executive’s employment by
the Company ends, as defined in Section 4.
(n)
Termination of Employment . “Termination
of Employment” means that the common-law employer-employee
relationship has ended between Executive and the Company (and its
affiliates). For purposes of payments under Sections 5 and 6, the
Termination of Employment must also be considered a
“separation from service” under Code § 409A and
the guidance thereunder.
12.
Successors and Assigns . This Agreement is
binding on and inures to the benefit of Executive and
Executive’s heirs, legal representatives and permitted
assigns, and on the Company and its successors and permitted
assigns. No rights or obligations of Executive or the Company
hereunder may be assigned, pledged, disposed of or transferred by
such party to any other person or entity without the prior written
consent of the other party.
13.
Separate Representation . Executive hereby
acknowledges that Executive has sought and received independent
advice from counsel of Executive’s own selection in
connection with this Agreement and has not relied to any extent on
any officer, director or shareholder of, or counsel to, the Company
in deciding to enter into this Agreement.
14.
Governing Law . All matters relating to the
interpretation, construction, application, validity and enforcement
of this Agreement shall be governed by the laws of the State of
Minnesota without giving effect to any choice or conflict of law
provision or rule, whether of the State of Minnesota or any other
jurisdiction, that would cause the application of laws of any
jurisdiction other than the State of Minnesota.
15.
Dispute Resolution . The parties shall endeavor
to resolve any dispute arising out of or relating to this
Agreement, Executive’s employment with the Company or the
termination of such employment (except for any dispute arising
under the Management Agreement or the Employee Agreement) (a
“Dispute”) by mediation and, if such mediation is not
successful, by final and binding arbitration. Disputes and claims
encompassed by this Agreement include all applicable federal, state
and local employment-related claims, whether based on common law
(such as breach of contract or defamation) or statutes (such as the
Americans With Disabilities Act, Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act, and the
Minnesota Human Rights Act). The parties shall first attempt in
good faith to resolve any Dispute by confidential mediation before
a qualified mediator mutually agreed upon by the parties. If the
Dispute is not resolved by mediation within 45 days after initial
notice of the Dispute, then the Dispute shall be finally resolved
by arbitration before a single arbitrator in accordance with the
then most recent Employment Dispute Resolution Rules of the
American Arbitration Association. Any mediation or arbitration
hereunder shall be conducted in Minneapolis, Minnesota.
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The decision of the arbitrator
shall be final and binding, and any court of competent jurisdiction
may enter judgment upon the award. All fees and expenses of the
arbitrator shall be paid by the Company. The arbitrator shall have
the jurisdiction and authority to interpret and apply the
provisions of this Agreement and relevant federal, state and local
laws, rules and regulations insofar as necessary to the
determination of the Dispute and to remedy any breaches of the
Agreement or violations of applicable laws, but shall not have
jurisdiction or authority to alter in any way the provisions of
this Agreement. The parties hereby agree that this arbitration
provision shall be in lieu of any requirement that either party
exhaust such party’s administrative remedies under federal,
state or local law. Executive and the Company acknowledge and agree
that this arbitration provision is beneficial to both parties
because it provides a quick, less expensive and confidential manner
of resolving finally any dispute or claim. All mediation and
arbitration proceedings hereunder shall be confidential and the
parties, mediator and arbitrator shall keep confidential the
existence and nature of any Dispute and all related proceedings.
Notwithstanding anything to the contrary provided in this
Section 15 and without prejudice to the above procedures,
either party may apply to any court of competent jurisdiction for
temporary injunctive or other provisional judicial relief if in
such party’s sole judgment such action is necessary to avoid
irreparable damage or to preserve the status quo until such time as
the arbitration award is rendered or the controversy is otherwise
resolved.
16.
Notices . All notices hereunder shall be
delivered by hand or sent by registered or certified mail, return
receipt requested, postage prepaid, to the party to receive the
same at the address set forth with the signature of such party
hereto or at such other address as may have been furnished to the
sender by notice hereunder.
17.
Counterparts . This Agreement may be executed in
counterparts, each of which when so executed shall be deemed to be
an original, and such counterparts shall together constitute but
one and the same instrument.
18.
Entire Agreement . This Agreement and the
documents and instruments referred to herein contain the entire
understanding of the parties hereto with respect to the employment
of Executive by the Company.
19.
Amendments and Waivers . No provision hereof may
be altered, amended, modified, waived or discharged in any way
whatsoever except by written agreement executed by both parties. No
delay or failure of either party to insist, in any one or more
instances, upon performance of any of the terms and conditions of
this Agreement or to exercise any rights or remedies hereunder
shall constitute a waiver or a relinquishment of such rights or
remedies or any other rights or remedies hereunder.
20.
Severability; Survival . 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 or arbitrator, as the case may be,
may so modify the objectionable provision as to make it valid,
reasonable and enforceable. The obligations and rights of the
parties hereunder that by their terms continue beyond the Term
shall survive the termination of this Agreement.
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21.
Replacement of Prior Agreement(s) . This
Agreement and the Management Agreement replace and supersede all
prior Management Agreement(s) between the Company and Executive of
any nature whatsoever, including without limitation the Amended and
Restated Management Agreement between them dated as of
____________, 200_, which agreement(s) shall be of no further force
or effect.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the date and year first above
written.
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EXECUTIVE
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TENNANT
COMPANY
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Name:
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Name:
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Address:
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Title:
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Address:
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