**SEVERANCEAND CHANGE OF CONTROL AGREEMENT**

 

THIS severanceand change of control AGREEMENT ("Agreement") is made andentered into as of September 26, 2001, by and between Provell, Inc., aMinnesota corporation (the "Company") and Michael T. McGowan, an individualand resident of the state of Minnesota ("Executive").

** **

**RECITALS**

 

A.            These Recitals shall be and hereby are incorporated asessential terms of this Agreement, and describe (i) the general nature andreasons for the Company's desire to enter into this Agreement and (ii)Executive's rights and obligations under this Agreement.  Any interpretation or construction of thisAgreement shall be considered in light of these Recitals.

 

B.            Executive is currently employed as the Company's VicePresident of Marketing and, as such, is a key executive of the Company.

 

C.            The Board of Directors of the Company believes that it isimperative to diminish the inevitable distraction to Executive that arises byvirtue of the personal uncertainties and risks created by any pending orthreatened Change in Control (as defined herein) of the Company.

 

D.            The Company believes that it is important that it receivecertain assurances with respect to its Confidential Information and Executive'sWork Product (each as defined herein) and that the Company receive certainprotections with respect to Executive's activities following termination of hisemployment and is willing to offer Executive the compensation, bonuses andother benefits set forth in this Agreement in order to obtain such assurancesand protections.

 

E.             The Company desires to continue to employ Executive andExecutive desires to be employed by the Company, on the terms and conditions,and pursuant to the covenants, set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the premises andfor other good and valuable consideration, the receipt and sufficiency of whichare hereby acknowledged, the Company and Executive agree as follows:

** **

**ARTICLE 1**

 

**definitions**

 

1.1           Annual Bonus.  For purposes of this Agreement, "AnnualBonus" means the largest annual bonus paid to Executive in the three yearsimmediately preceding the time a Severance Payment is due under this Agreement.

 

1.2           Base Salary.  For purposes of this Agreement, "BaseSalary" means the greater of:  (i)$175,000, (ii) Executive's annual base salary, as established by the Board ofDirectors from time to time, then in effect at the time a Severance Payment isdue under this Agreement, or (iii) the average annual base salary paid toExecutive over the twenty-four (24) months preceding the time a SeverancePayment is due under this Agreement calculated by dividing the total basesalary paid to Executive over such twenty-four (24) months by two (2).

 

1.3           Cause.  For purposes of this Agreement,"Cause" means termination of Executive in the event that Executive:(i) has repeatedly failed to perform the material duties specified for theposition to which Executive has been elected, which failure is willful anddeliberate; (ii) has engaged in an act or acts of dishonesty which is or areintended to result in substantial personal enrichment for Executive; (iii) hasknowingly engaged in conduct which is materially injurious to the Company; (iv)is convicted of, or pleads NOLO CONTENDERE to (A) any felony (other than any felonyarising out of negligence), or (B) any crime or offense involving dishonestywith respect to the Company; (v) knowingly provides materially misleadinginformation concerning the Company to the Board of Directors of the Company,any governmental body or regulatory agency or any lender or other financingsource or proposed financing source of the Company.

 

1.4           Change of Control.  For purposes of this Agreement, "Changeof Control" means:

 

(a)           any "Person" or"Persons" (as such terms are used in Sections 13(d) and 14(d) of theSecurities Exchange Act of 1934, as amended (the "Exchange Act"))(other than the Company, any employee benefit plan of the Company or any entitywhich reports beneficial ownership of the Company's outstanding securities onSchedule l3G pursuant to Regulation Section 240.l3d-l promulgated under theExchange Act) becomes a Beneficial Owner (as defined in Rule 13d-3 and Rule13d-5 under the Exchange Act), directly or indirectly, of securities of theCompany representing 35% or more of the voting power of all of the Company'sthen outstanding securities; or

 

(b)           the sale, transfer, conveyance orother disposition (pursuant to a sale of assets, a merger or consolidation orsimilar transaction), in one or a series of related transactions, of all orsubstantially all of the assets of the Company to any Person or Persons (asdefined above); or 

 

(c)           a merger, consolidation or similartransaction to which the Company is a party, if the individuals and entitieswho were shareholders of the Company, as applicable, immediately prior to theeffective date of such merger, consolidation or similar transaction do not havethe same proportionate ownership of common stock of the surviving corporationimmediately following the effective date of such merger, consolidation orsimilar transaction; or

 

(d)           the adoption by the Company of a planproviding for its liquidation or dissolution.

 

(e)           Any references in this Agreement tothe date or the time of the Change of Control shall mean:  (i) with respect to subsection (a) above,the date such Person closes on a purchase wherein it acquires sufficient sharessuch that it then owns 35% or more of the Company's voting shares; (ii) withrespect to subsections (b) and (c) above, the closing date for such sale of assets,merger, consolidation or similar transaction; and (iii) with respect tosubsection (d) above, the date such plan is approved by the shareholders of theCompany.

 

1.5           Good Reason.  For purposes of this Agreement, "GoodReason" means termination by Executive in the event that the Company:  (i) reduces the scope of Executive'sauthority and responsibility without Executive's prior consent; (ii) reducesExecutive's base salary, reduces the amount of annual bonus for which Executiveis eligible, amends any stock incentives or employee retirement plan applicableto Executive in a way which is materially adverse to Executive, or materiallyreduces the other benefits to which Executive is entitled without Executive'sprior consent; (iii) requires Executive's principal place of employment to beanywhere other than the Company's principal executive offices, or there is arelocation of the Company's principal executive offices outside of theMinneapolis/St. Paul, Minnesota metropolitan area; or (iv) otherwise fails toperform its obligations under this Agreement.

 

1.6           Severance Payment.  For purposes of this Agreement,"Severance Payment" means the amount calculated by multiplying thesum of Executive's Base Salary plus Annual Bonus by two:  

 

(Base Salary + Annual Bonus) x 2 = Severance Payment.

 

1.7           Termination Date.  For purposes of this Agreement,"Termination Date" means the date on which Executive ceases to be anemployee of the Company.

** **

**ARTICLE 2**

** **

**severance AND OTHERTERMINATION BENEFITS**

 

2.1           Severance.  The Company shall pay to Executive theSeverance Payment (less appropriate payroll withholding as required by law)upon (i) a termination of Executive's employment by the Company without Cause,(ii) a termination of Executive's employment by Executive for Good Reason, or(iii) a termination of Executive's employment, whether voluntary orinvoluntary, for any reason other than for Cause upon or within (and including)13 months after a change of control.

 

2.2           Disability and Medical/DentalCoverage; No Unpaid Vacation or Sick Leave.  In addition to any Severance Payment Executive may be entitled toreceive under Section 2.1 above, if Executive's employment is terminated (i) bythe Company without Cause, (ii) by Executive for Good Reason or (iii)whethervoluntary or involuntary for any reason other than for cause upon or within(and including) 13 months after a Change of Control then the Company shallcontinue the disability and medical/dental coverage provided to Executiveimmediately prior to Executive's Termination Date.  Such coverage shall be provided by the Company at its sole costuntil the second anniversary of the Termination Date.  If and to the extent additional benefits are available, Executivehas the right to continue health benefits under COBRA laws in effect on theTermination Date.  Executiveacknowledges that the number of months of health insurance benefits availableunder this Section 2.3 exceed by six (6) months the number of required monthsunder current law.  Executive shall notbe deemed to have and shall not be paid for any unpaid vacation or sick leaveupon his termination of employment for any reason, voluntary or involuntary.

 

2.3           Other Termination Benefits.  In addition to the benefits described above,upon termination (whether voluntary or involuntary) of Executive’s employmentwith the Company, Executive shall be entitled to receive the followingbenefits:

 

(a)           The Company shallpay to Executive (i) the full base salary earned by him and unpaid through theTermination Date, at the rate in effect at the time written notice oftermination (voluntary or involuntary) was given, (ii) and any amount earned byExecutive as a bonus with respect to the fiscal year of the Company precedingthe termination of his employment if such bonus has not theretofore been paidto Executive.

 

(b)           The Company shallalso pay to Executive all legal fees and expenses incurred by Executive as aresult of such termination of employment (including all fees and expenses, ifany, incurred by Executive in successfully seeking to obtain or enforce anyright or benefit provided to Executive by this Agreement whether by arbitrationor otherwise); and

 

(c)           Executive shall notbe required to mitigate the amount of any payment provided for in this Section4 by seeking other employment or otherwise. The amount of any payment or benefit provided in this Section 4 shallnot be reduced by any compensation earned by Executive as a result of anyemployment by another employer.

 

(d)           For the avoidance ofdoubt, Executive acknowledges that the Company shall be under no obligation toprovide Executive with an automobile or an automobile allowance at any timeafter the Termination Date pursuant to any term of this Agreement.

 

2.4           Payment.  All amounts due under Section 2 of thisAgreement shall be paid to Executive no later than the close of business on theearlier to occur of the Termination Date or the date of the Change of Control.

 

**ARTICLE 3**

** **

**certain additionalpayments by the company**

 

3.1           Gross-Up Payment.  Anything to the contrary notwithstanding, inthe event it shall be determined that any payment, distribution or benefit madeor provided by the Company to or for the benefit of Executive (whether pursuantto this Agreement or otherwise) (a "Payment"), would be subject to theexcise tax imposed by Section 4999 of the Internal Revenue Code of 1986, asamended (the "Code"), or any interest or penalties with respect tosuch excise tax (such excise tax, together with any such interest andpenalties, being collectively referred to as the "Excise Tax"), thenthe Company shall pay Executive in cash an amount (the "Gross-UpPayment") such that, after payment by Executive of all taxes (includingany payroll or FICA taxes, and any interest or penalties imposed with respectto all such taxes), including but not limited to income taxes (and any interestand penalties imposed with respect thereto) and the Excise Tax imposed upon theGross-Up Payment, Executive retains an amount of the Gross-Up Payment equal tothe Excise Tax imposed on the Payments. An example of the calculation of theGross-Up Payment is attached hereto as Exhibit A.

 

3.2           Determination of Gross-Up Payment.  Subject to Section 3.3, all determinationsrequired to be made under this Article 3, including whether a Gross-Up Paymentis required and the amount of the Gross-Up Payment, shall be made by the firmof independent public accountants selected by the Company to audit itsfinancial statements for the year immediately preceding the Change in Control(the "Accounting Firm").  TheAccounting Firm shall provide detailed supporting calculations to the Companyand Executive within thirty (30) days after the Termination Date.  In the event that the Accounting Firm isserving as accountant or auditor for the individual, entity or group effectingthe Change in Control, Executive may appoint another nationally recognizedaccounting firm to make the determinations required under this Article 3 (whichaccounting firm shall then be referred to as the "Accounting Firm").  All fees and expenses of the Accounting Firmin connection with the work it performs pursuant to this Article 3 shall bepromptly paid by the Company.  AnyGross-Up Payment (as determined pursuant to this Article 3) shall be paid bythe Company to Executive within five (5) days of the receipt of the AccountingFirm's determination.  If the AccountingFirm determines that no Excise Tax is payable by Executive, it shall furnishExecutive with a written opinion that failure to report the Excise Tax onExecutive's applicable federal income tax return would not result in theimposition of a negligence or a similar penalty.  Any determination by the Accounting Firm shall be binding uponthe Company and Executive.  As a resultof the uncertainty in the application of Section 4999 of the Code at the timeof the initial determination by the Accounting Firm, it is possible thatGross-Up Payments which will not have been made by the Company should have beenmade ("Underpayment").  In theevent that the Company exhausts its remedies pursuant to Section 3.3, andExecutive is thereafter required to make a payment of Excise Tax, theAccounting Firm shall promptly determine the amount of the Underpayment thathas occurred and any such Underpayment shall be paid by the Company toExecutive within five (5) days after such determination.

 

3.3           Contest.  Executive shall notify the Company inwriting of any claim made by the Internal Revenue Service that, if successful,would require the Company to pay a Gross-Up Payment.  Such notification shall be given as soon as practicable but nolater than ten (10) business days after Executive knows of such claim and shallapprise the Company of the nature of such claim and the date on which suchclaim is requested to be paid.  Executiveshall not pay such claim prior to the expiration of the 30-day period followingthe date on which Executive gives such notice to the Company (or such shorterperiod ending on the date that any payment of taxes with respect to such claimis due).  If the Company notifiesExecutive in writing prior to the expiration of such period that it desires tocontest such claim, Executive shall:

 

(a)           give the Company any informationreasonably requested by the Company relating to such claim;

 

(b)           take such action in connection withcontesting such claim as the Company shall reasonably request in writing fromtime to time, without limitation, accepting legal representation with respectto such claim by an attorney selected by the Company and reasonably acceptableto Executive;

 

(c)           cooperate with the Company in goodfaith in order to effectively contest such claim; and

 

(d)           permit the Company to participate inany proceedings relating to such claim, provided that the Company shall bearand pay directly all costs and expenses (including additional interest andpenalties) incurred in connection with such contest and shall indemnify andhold Executive harmless, on an after-tax basis, for any Excise Tax or incometax, including interest and penalties with respect thereto, imposed as a resultof such representation and payment of costs and expenses.  Without limitation on the foregoingprovisions of this Section 3.3, the Company shall control all proceedings takenin connection with such contest.  At itssole option, the Company may pursue or forego any and all administrativeappeals, proceedings, hearings and conferences with the taxing authority inrespect of such claim and may either direct Executive to pay the tax claimedand sue for a refund or contest the claim in any permissible manner.  Executive agrees to prosecute such contestto a determination before any administrative tribunal, in a court of initialjurisdiction and in one or more appellate courts, as the Company shalldetermine, provided that if the Company directs Executive to pay such claim andsue for a refund, the Company shall advance the amount of such payment toExecutive, on an interest-free basis, from any Excise Tax or income tax,including interest or penalties with respect thereto, imposed with respect tosuch advance or with respect to any imputed income with respect to suchadvance, and further provided that any extension of the statute of limitationsrelating to payment of taxes for the taxable year of Executive with respect towhich such contested amount is claimed to be due is limited solely to suchcontested amount.  Furthermore, theCompany's control of the contest shall be limited to issues with respect towhich a Gross-Up Payment would be payable hereunder, and Executive shall beentitled to settle or contest, as the case may be, any other issue raised bythe Internal Revenue Service or any other taxing authority.

 

3.4           Refund.  If, after the receipt by Executive of anamount advanced by the Company pursuant to Section 3.3, Executive becomesentitled to receive any refund with respect to such claim, Executive shall(subject to the Company's complying with the requirements of Section 3.3)promptly pay to the Company the amount of such refund (together with anyinterest paid or credited thereon after taxes applicable thereto).  If, after the receipt by Executive of anamount advanced by the Company pursuant to Section 3.3, a determination is madethat Executive shall not be entitled to any refund with respect to such claimand the Company does not notify Executive in writing of its intent to contestsuch denial of refund prior to the expiration of thirty (30) days after suchdetermination, then such advance shall be forgiven and shall not be required tobe repaid and the amount of such advance shall offset, to the extent thereof,the amount of Gross-Up Payment required to be paid.

** **

**ARTICLE 4**

** **

**TERM and survival**

 

The Company's obligation under Sections 2.1 and 2.2 topay a Severance Payment and provide other benefits to Executive a terminationof employment within 13 months after a Change of Control shall terminate on thefourth anniversary date of this Agreement, provided, however, tothe extent any such obligation arose on or prior to such fourth anniversarydate due Executive's termination of employment on or prior to the fourthanniversary date and such obligation remains unperformed on the thirdanniversary date, such obligation shall survive.  The Company's obligation to pay a Severance Payment and otherbenefits under Sections 2.1 and 2.2 upon a termination without Cause ortermination for Good Reason and the Company's obligations to make paymentsunder Sections 2.3 and 3.1 shall survive indefinitely.  The rights and obligations of the partieswith respect to Articles 5, 6 and 7 shall survive for the periods set forth inArticles 5, 6 and 7. 

 

**ARTICLE 5**

 

**PROTECTION OF TRADESECRETS AND**

**CONFIDENTIAL information**

 

5.1           Covenant to Protect ConfidentialInformation.  Executive acknowledgesthat in connection with Executive's employment by the Company, Executive willbe brought into contact with Confidential Information (as defined below), andExecutive and the Company agree that in consideration of the covenants of theCompany pursuant to this Agreement that upon a Change of Control, terminationby the Executive for Good Reason, or termination with Cause:

 

(a)           Executive will not disclose to anyperson or entity any Confidential Information after the term of his employment,except to employees of the Company who, in the reasonable judgment of Executiveneed such information for the performance of their duties, and attorneys,accountants or other representatives of the Company as may be necessary orappropriate in the ordinary course of performing Executive's duties as anexecutive of the Company, or otherwise with the Company's express prior writtenconsent.

 

(b)           Executive will not disclose ortransfer any Confidential Information to any third party without the expressprior written consent of the Company (which consent shall not be unreasonablyhindered or delayed), except that Executive may make such disclosures to thirdparties:  (i) in the ordinary course ofconducting the business of the Company, (ii) subject to a confidentialityagreement in form and substance reasonably acceptable to the Company and (iii)in compliance with orders, rules or regulations of judicial, regulatory orself-regulatory organizations having jurisdiction over either the Company orExecutive.

 

(c)           Executive will deliver to the Companypromptly upon termination of employment, or at any other time that the Companymay so request, all memoranda, notes, records (including electronic datarecords), reports and other documents (and all copies thereof) relating to theConfidential Information which he may then possess or have within his control.

 

(d)           For purposes of this Agreement,"Confidential Information" means any information which is proprietaryor unique to the business of the Company, including but not limited to tradesecret information, matters of a technical nature such as processes, devices,techniques, data and formulas, research subjects and results, marketingmethods, plans and strategies, operations, products, revenues, expenses,profits, sales, key personnel, customers, suppliers, pricing policies, anyinformation concerning the marketing and other business affairs and methods ofthe Company which is not readily available in the Company's industry, and anyinformation the Company has indicated to Executive in an unambiguous writing isconfidential.

 

5.2           Termination of Obligation ofConfidentiality.  The confidentialityobligations imposed by Section 5.1 shall cease to apply to ConfidentialInformation after the EARLIEST of the date on which the ConfidentialInformation which has been treated by the Company as Confidential Information:(i) was known to Executive before it was obtained from the Company; (ii) waspublicly available on the date of first receipt from the Company; (iii) hasbecome generally known to the public in the United States through no fault ofExecutive; (iv) has been disclosed to Executive free of any obligation ofconfidentiality by a third party who, to the knowledge of Executive, has theright to disclose the same and did not derive the information from the Company;or (v) was independently developed by Executive without the use of the ConfidentialInformation; provided that, with respect to clauses (i), (iv) and (v) only,such date must be established through Executive providing the Company withwritten evidence clearly establishing such exception.

 

5.3           Survival of Covenants.  The obligations of this Article 5 shallindefinitely survive the termination of Executive's employment with the Companyand shall be binding upon any and all of Executive's assigns, executors,administrators and other legal representatives.  However, notwithstanding anything to the contrary in thisAgreement, if the Company either breaches any covenant to pay or providebenefits to Executive under Article 2 hereof, whether before or after theTermination Date, in addition to all other remedies in equity or at law whichExecutive may otherwise be entitled to pursue, the Covenant to ProtectConfidential Information shall terminate and be of no further force or effect if such breach has notbeen cured by the Company within five (5) calendar days after the date of suchbreach.  The Company understands andagrees that such termination under such circumstances is reasonable and willnot be deemed to be an election of remedies by Executive, and that Executiveshall be entitled to pursue all amounts and benefits owed to him under Article2 thereafter.

 

**ARTICLE 6**

** **

**work product**

 

6.1           Work Product. Executiveacknowledges that Work Product (as defined below) belongs solely to the Companyupon a Change of Control, termination by the Executive for Good Reason, ortermination with Cause:

 

(a)           At the request of the Company,Executive shall (i) assign (and Executive does hereby assign) to the Companyall of his ownership in and rights to such Work Product, and  (ii) assist the Company, at the Company’sexpense, as requested during and after employment to evidence, perfect andenforce the rights of the Company in and ownership of such Work Product bypromptly executing and delivering to the Company, the necessary writteninstruments and by performing such other acts as may be necessary, in the opinionof the Company, so as to enable the Company to obtain and maintain patent,copyright or other intellectual property rights in such Work Product and so asto vest the entire right and title thereto in the Company.

 

(b)           Pursuant to the provisions of Minn.Stat. Section 181.78, the Company hereby notifies Executive that this Section6.1 does not apply to an invention for which no equipment, supplies, facilityor trade secret information of the Company was used and which was developedentirely on Executive's own time, and (i) which does not relate (A) directly tothe business of the Company, or (B) to the Company's actual or demonstrablyanticipated research or development, or (ii) which does not result from anywork performed by Executive for the Company.

 

(c)           For purposes of this Agreement,"Work Product" means all inventions, creations, innovations,improvements, technical information, systems, software developments, methods,designs, analyses, drawings, reports, service marks, trademarks, tradenames, logosand all similar or related information (whether patentable or unpatentable)which relate to the Company's actual or anticipated business, research anddevelopment or existing or future products or services which are conceived,developed or made by Executive (whether or not during usual business hours andwhether or not alone or in conjunction with any other person) while employed bythe Company (including those conceived, developed or made prior to the date ofthis Agreement), together with all patent applications, letters patent,trademark, tradename and service mark applications or registrations, copyrightsand reissues thereof that may be granted for or upon any of the foregoing.

 

6.2           Survival of Covenants.  The obligations of this Article 6 shall indefinitelysurvive the termination of Executive's employment with the Company with respectto inventions or other discoveries conceived or otherwise developed duringExecutive's employment and shall be binding upon any and all of Executive'sassigns, executors, administrators and other legal representatives.  However, notwithstanding anything to thecontrary in this Agreement, if the Company either breaches any covenant to payor provide benefits to Executive under Article 2 hereof, whether before orafter the Termination Date, in addition to all other remedies in equity or atlaw which Executive may otherwise be entitled to pursue, the foregoing WorkProduct covenant shall terminate and be of no further force or effect if suchbreach has not been cured by the Company within five (5) calendar days afterthe date of such breach.  The Companyunderstands and agrees that such termination under such circumstances isreasonable and will not be deemed to be an election of remedies by Executive,and that Executive shall be entitled to pursue all amounts and benefits owed tohim under Article 2 thereafter.

 

**ARTICLE 7**

** **

**NONCOMPETITION,NONSOLICITATION AND NONDISPARAGEMENT**

 

7.1           Noncompetition, Nonsolicitationand Nondisparagement.  Executiveacknowledges and agrees with the Company that, during the course of Executive'semployment with the Company, Executive has had and will continue to have theopportunity to develop relationships with existing employees, customers andother business associates of the Company, which relationships constitutegoodwill of the Company, and Executive acknowledges and agrees that the Companywould be irreparably damaged if Executive were to take actions that woulddamage or misappropriate such goodwill. Executive accordingly covenants and agrees that upon a Change ofControl, termination by Executive for Good Reason or termination with Cause asfollows:

 

(a)           Executive acknowledges that theCompany currently conducts throughout the United States (the"Territory") the business of selling membership/enhancement services(the "Subject Business") accordingly, in consideration of thecovenants of the Company pursuant to this Agreement, from the date hereof untilthe first anniversary of Executive's Termination Date (the "Noncompete Period"),Executive shall not, directly or indirectly, engage in, assist, give or lendfunds to or otherwise finance, be employed by or consult with, or have afinancial or other interest in, any “Competitor” (as defined below) whichengages in the Subject Business or markets programs, products or servicessimilar to those of the Company as of Executive's last day of employment withthe Company, whether for or by himself or as an independent contractor, agent,stockholder, partner or joint venturer with any such Competitor, provided thatthe aggregate ownership by Executive of no more than two percent of theoutstanding equity securities of any Person, including any Competitor, whichsecurities are traded on a national or foreign securities exchange, quoted onthe Nasdaq Stock Market or other automated quotation system shall not be deemedto be giving or lending funds to, otherwise financing or having a financialinterest in a competitor.  As usedherein, the term, “Competitor” means those Persons identified on Exhibit Battached hereto and any company or any business unit of any company thatreceives more than 75% of its annual revenues engaging in theMembership/Enhancement Services Business. Also, as used herein, Membership/Enhancement Services Business means thesale or marketing of memberships to clubs for which club members/customers payan annual membership fee which fee is automatically renewed unless the customercancels his/her/its membership.  

 

(b)           Executive covenants and agrees thatduring the Noncompete Period, Executive will not, directly or indirectly,either for himself or for any other Person (i) solicit or initiate contact withany employee of the Company, or any former employee of the Company whoseemployment with the Company terminated within six months of such solicitationor contact, for the purpose of employing such individual, (ii) solicit anysupplier to the Company as of Executive's last day of employment with theCompany to purchase or distribute information, products or services of or onbehalf of Executive or such other Person that are competitive with theinformation, products or services provided by the Company, or (iii) make anydisparaging statements concerning the Company or its officers, directors oremployees, to any lessor, lessee, vendor, supplier, customer, distributor,employee, consultant or other business associate of the Company, as suchrelationship relates to the Company's conduct of the Subject Business.  Notwithstanding the foregoing, this section7.1(b) does not prohibit or restrict communicating with or hiring employees orformer employees of the Company who first initiate contact with Executive orwho respond to a general public solicitation of employment such as a newspaperadvertisement.

 

(c)           Executive understands that the foregoingrestrictions may limit Executive's ability to earn a livelihood in a businesssimilar to the business of the Company, but Executive nevertheless believesthat Executive has received and will receive sufficient consideration and otherbenefits as provided hereunder to clearly justify such restrictions which, inany event (given Executive's education, skills and ability), Executive does notbelieve would prevent him from otherwise earning a living.

 

(d)           Notwithstanding anything to thecontrary in this Agreement, if the Company either breaches any covenant to payor provide benefits to Executive under Article 2 hereof, whether before or  after the Termination Date, in addition toall other remedies in equity or at law which Executive may otherwise be entitledto pursue, the foregoing noncompetition, nonsolicitation and nondisparagementcovenants shall  terminate and be of nofurther force or effect if such breach has not been cured by the Company withinfive (5) calendar days after the date of such breach.  The Company understands and agrees that such termination undersuch circumstances is reasonable and will not be deemed to be an election ofremedies by Executive, and that Executive shall be entitled to pursue allamounts and benefits owed to him under Article 2 thereafter.

 

**ARTICLE 8**

** **

**remedies**

 

8.1           Remedies.  In the event of the violation or threatenedviolation by Executive of any of the covenants contained in this Agreement, inaddition to any other remedy available in law or in equity, the Company shallhave (i) the right and remedy of specific enforcement, including injunctiverelief, it being acknowledged and agreed that any such violation or threatenedviolation may cause irreparable injury to the Company and that monetary damageswill not provide an adequate remedy, (ii) the right and remedy to withhold anypayments or benefits required to be made or provided to Executive hereunderupon the material and continuing violation by Executive of any provisions ofArticles 5, 6 or 7 hereof, but without limiting Executive's obligations underArticles  5 or 6 hereof, provided thatall such payments shall be promptly paid over to Executive if the arbitratorsreferenced in Article 9 hereof determines that Executive did not violate suchprovisions, and (iii)the right to any and all damages available as a matter oflaw.

 

8.2           Reformation.  In furtherance and not in limitation of theforegoing, should any duration or geographical restriction on businessactivities covered under this Agreement or any other provision of thisAgreement be found by any court of competent jurisdiction to be less than fullyenforceable due to its breadth of restrictiveness or otherwise, Executive andthe Company intend that such court will enforce this Agreement to the fullextent that the court may find permissible by construing such provisions tocover only that duration, extent or activity which may be enforceable.  Executive and the Company acknowledge theuncertainty of the law in this respect and intend that this Agreement will begiven the construction that renders its provisions valid and enforceable to themaximum extent permitted by law.

 

**ARTICLE 9**

** **

**arbitration**

 

In the event of a dispute between the Company andExecutive regarding either party's failure to comply with the covenants containedin this Agreement, it is the intention of the parties that the dispute shall beresolved as expeditiously as possible, consistent with fairness to bothsides.  Accordingly, any such mattersshall be resolved by binding private arbitration before a singlearbitrator.  Within thirty (30) days ofreceipt of such notice by the opposing party, the parties shall meet in goodfaith to appoint a disinterested and neutral arbitrator.  In the event the parties cannot agree uponthe identity of the neutral arbitrator within said thirty (30) day period, thenthe neutral arbitrator shall be appointed by the Chief Judge of Hennepin County(Minnesota) District Court.  Anyarbitration proceeding conducted hereunder shall be in the City of Minneapolisand shall follow the procedures set forth in the Rules of CommercialArbitration of the American Arbitration Association, and both sides shallcooperate in as expeditious a resolution of the proceeding as is reasonableunder the circumstances.  The arbitratorshall apply the law of the State of Minnesota. The arbitrator shall have the power to enter any relief he or she deemsfair and just on any claim, including interim and final equitable relief, alongwith any procedural order that is reasonable under the circumstances.  Any award rendered by the arbitrator may befiled and a judgment obtained in any court having jurisdiction over the partiesunless the relief granted in the award is delivered within ten (10) days of theaward.  Either party may requestarbitration by written notice to the other party.

** **

**ARTICLE 10**

** **

**miscellaneous**

 

10.1         No Funding of Severance.  Nothing contained in this Agreement orotherwise shall require the Company to segregate, earmark or otherwise setaside any funds or other assets to provide for any payments required to be madeunder Articles 2 or 3 hereof, and the rights of Executive to any benefitshereunder shall be solely those of a general, unsecured creditor of theCompany.

 

10.2         Beneficiaries.  In the event of Executive's death, anyamount or benefit payable or distributable to him pursuant to this Agreementshall be paid to the beneficiary designated by Executive for such purpose inthe last written instrument received by the Company prior to Executive's death,if any, or, if no beneficiary has been designated, to Executive's estate, butsuch designation shall not be deemed to supersede any beneficiary designationunder any benefit plan of the Company.

 

10.3         Governing Law; Jurisdiction.  This Agreement shall be construed,interpreted and enforced according to the statutes, rules of law and courtdecisions of the State of Minnesota without regard to conflict of lawprovisions.  Executive hereby submits tothe jurisdiction of, and waives any venue objections against, the State ofMinnesota and the federal courts of the United States located in such state inrespect of all actions arising out of or in connection with this Agreement, andExecutive consents to the personal jurisdiction of such courts for suchpurposes.

 

10.4         Assignment and Survival.  This Agreement is binding upon the Companyand Executive and their permitted successors and assigns.  The obligations of Articles 5, 6, 7, 8, 9and 10 of this Agreement will survive the termination of Executive's employmentwith the Company.  The services renderedby Executive to the Company under this Agreement are personal in nature and,therefore, Executive may not delegate Executive's duties or obligations underthis Agreement.  The Company may assignits rights and delegate its duties and obligations under this Agreement.

 

10.5         No Waiver.  The failure of either the Company orExecutive to object to any conduct or violation of any of the covenants made bythe other under this Agreement will not be deemed a waiver of any rights orremedies.  No waiver of any right orremedy arising under this Agreement will be valid unless set forth in anappropriate writing signed by both the Company and Executive.  This Agreement shall not give Executive anyright to be employed for any specific time or limit the Company's right toterminate Executive's employment at any time, with or without Cause.

 

10.6         Modification.  This Agreement supersedes and replaces anyand all prior and written understandings, if any, between the parties relatingto the subject matter of this Agreement, including any previous employmentcontract which is hereby revoked.  Theparties agree that this Agreement and the Exhibits attached hereto (a) setforth the entire understanding and agreement between the parties with respectto the subject matter of this Agreement and (b) is the complete and exclusivestatement of the terms and conditions thereof, and there are no other writtenor oral agreements in regard to the subject matter of this Agreement.  This Agreement shall not be changed ormodified except by a written document signed by the parties hereto.

 

10.7         Unique Nature of Agreement.  The covenants made in, and the rightsconveyed by, this Agreement are of a unique and special nature.  Any violation of this Agreement by Executivewill result in immediate and irreparable to the Company.  In such event, Executive acknowledges thatthis Agreement entitles the Company to an injunction or decree of specificperformance from a court of equity in addition to other rights or remedieswhich the Company may have at law or in equity.  Executive hereby waives the right to assert the defense that anysuch breach or violation can be adequately compensated in damages and in anaction at law.

 

10.8         Severability.  The covenants, provisions, and sections ofthis Agreement are severable.  If anyportion of this Agreement is held to be unlawful or unenforceable, the samewill not affect any other portion of this Agreement, and the remaining termsand conditions or portions thereof will remain in full force and effect.  This Agreement will be construed in suchcase as if such unlawful or unenforceable portion had never been contained inthis Agreement, in order to effectuate the intentions of the Company andExecutive in executing this Agreement.

 

10.9         Notices.  All notices, demands and othercommunications provided for hereunder shall be in writing and shall be giveneither by personal delivery, via facsimile transmission (receipt telephonicallyconfirmed), by nationally recognized overnight courier (prepaid), or bycertified or registered first class mail, postage prepaid, return receiptrequested, sent to each party at its/his address as set forth below or suchother address or in such other manner as may be designated by such party inwritten notice to each of the other parties. All such notices, demands and communications shall be effective whenpersonally delivered, one (1) business day after delivery to the overnightcourier, upon telephone confirmation of facsimile transmission or upon receiptafter dispatch by mail to the party to whom the same is given or made:

 

| If to Executive:    |   | Michael T. McGowan                                   |
|---------------------|--------|------------------------------------------------------|
|                |   | 8812 Windsor Terrace  North, Brooklyn Park, MN 55443 |
|                |   |                                                 |
| If to the  Company: |   | Provell, Inc.                                        |
|                |   | 301 Carlson  Parkway, Suite 201                      |
|                |   | Minnetonka, MN   55305                          |
|                |   |                                                 |
|                |   | Attention:  Chief Financial Officer             |

 

**[SIGNATURE PAGE FOLLOWS]**

 

IN WITNESS WHEREOF the following parties have executedthe above instrument the day and year first above written.

 
|   | **Provell,  Inc.** |
|--------|--------------------|
|   |               |
|   |               |
|   | By                 |   |
|   | Name               |   |
|   | Its                |   |
|   |               |
|   |               |
|   | **EXECUTIVE:**     |
|   |               |
|   |               |
|   | Michael T. McGowan |
|        |                    |  |  |

 

**exhibit a**

** **

**gross-up paymentcalculation**

 

Pursuant to Article 4 of the Executive EmploymentAgreement to which this Exhibit D is attached, a gross-up payment shall be paidto the Executive by the Company within the time period specified in the Agreementfor the amount of excise tax incurred by the Executive as a result of InternalRevenue Code Section 4999.  Thefollowing is an example of the result intended by Article 4 of the Agreement.

 

Definition of terms:

 

G=           Gross-up payment due,

P=           Amount of the parachute payment,

B=           Base amount,

R=           Aggregate applicable Federal andState (net of Federal benefit) income tax rate,

.2=           20% tax rate imposed by InternalRevenue Code Section 4999

 

Example assumptions:

 

G=           X,

P=           $1,000,000,

B=           $250,000, and

R=           .45

 

Based upon theassumptions listed, the gross-up payment is calculated as follows:

 

G=           (.2P - .2B) / (.8-R)

G=           [(.2($1,000,000) - .2($250,000)] /(.8 - .45)

G=           ($200,000 - $50,000) / .35

G=           $150,000 / .35

G=           $428,571

 

**EXHIBIT B**

** **

LIST OFCOMPETITORS

 

Memberworks, Inc.

 

Cendant’sMembership Services Business Unit, known as Trilegiant

 

Encore MarketingInternational Inc.

 

SignatureMarketing Group, Inc., currently owned by GE Financial Advisors

 

Brand DirectMarketing, Inc.

 

Eubiquity,currently owned by West Teleservices, Inc.

 

Metris Companies,Inc.