Document:

OSMONICS, INC

EXHIBIT 10 (c)

 

OSMONICS, INC.

 

CHANGE IN CONTROL AGREEMENT

 

THIS AGREEMENT is made by and 

between OSMONICS, INC., a Minnesota

corporation  (the “Company”), and D.

Dean Spatz (the “Employee”), as of the 26th day of April, 2001 (the “Effective

Date”).

 

RECITALS

 

A.                                                      The Board of

Directors of the Company (the “Board”) recognizes that the Employee’s

contribution to the growth and success of the Company and its subsidiaries will

be substantial.

 

B.                                 The Company may

engage in discussions concerning the possible acquisition of the Company’s

securities by another company or companies, and the possible merger of the

Company with or into another company or companies.

 

C.                                 Such

discussions and the attendant uncertainties caused by such discussions may have

an unsettling effect on key management employees.

 

D.                                It is in the

best interests of the Company that such key management employees, including

Employee, continue to be employed by the Company, whether or not an acquisition

or merger of the Company occurs.

 

E.                                  On or about

August, 1999, the Board determined that it was and is appropriate and in the

best interests of the Company and its stockholders to reinforce and encourage

the continued attention and dedication of members of the Company’s management,

including the Employee, to their assigned duties.

 

F.                                  The Board of

Directors subsequently determined that it would be in the best interests of the

Company to preclude key employees from competing with the Company should they

be required to leave the Company after a Change in Control (as defined herein).

 

G.                                 This Agreement

sets forth the severance compensation which the Company agrees it will pay to

the Employee if the Employee’s employment with the Company terminates under one

of the circumstances described herein following a Change in Control (as defined

herein).

 

H.                                This Agreement

also includes certain restrictive covenants by which Employee agrees to refrain

for a certain time from competition with the Company, from disclosure of

 

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confidential information he possesses concerning the Company, and from

any interference with relationships between the Company and other employees and

persons and organizations doing business with the Company.

 

I.                                     Such

restrictive covenants and the availability to the Company of the services of

Employee after the date hereof are important considerations in the Company’s

decision to provide the severance benefits under this Agreement, and the

Company is unwilling to provide the benefits set forth below to Employee unless

Employee executes and delivers this Agreement to the Company.

 

NOW THEREFORE, in consideration of the mutual covenants and conditions

herein contained and in further consideration of services performed and to be

performed by the Employee for the Company, the parties hereto agree as follows:

 

AGREEMENT

 

1.                     Certain

Definitions.  For purposes of this

Agreement, the following terms have the meanings indicated:

 

1.1              Applicable

Period.  For purposes of this

Agreement, the Applicable Period shall equal to the number of months equal to

the product of (i) twelve and (ii) the Factor (defined below).

 

1.2              Annual Cash

Compensation.  For purposes of this

Agreement, the Employee’s  Annual Cash

Compensation shall mean the sum of (i) the Employee’s annual base salary

(determined as of the time of the Change in Control of the Company or, if

higher, immediately prior to the date the Notice of Termination is given) plus

(ii) an amount equal to the greater of the Employee’s annual incentive target

bonus for the fiscal year in which the Date of Termination occurs or the annual

incentive bonus the Employee received for the fiscal year prior to the Change

in Control of the Company. 

Notwithstanding the foregoing, Annual Cash Compensation shall not

include any stock option received from the Company nor any cash received or

income reported by the Employee as a result of stock options received from the

Company.

 

1.3              Cause.

 

1.3.1     For purpose of this

Agreement “Cause” shall mean:

 

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1.3.1.1  the willful and continued

failure by the Employee to substantially perform his material duties hereunder

(other than any such failure resulting from the Employee’s incapacity due to

physical or mental illness or any such actual or anticipated failure after the

issuance of a Notice of Termination by the Employee for Good Reason), after

receipt by the Employee of written demand for substantial performance of his

material duties is delivered by the Company that specifically identifies the

manner in which the Company believes the Employee has not substantially

performed his material duties and which notice gives the Employee not less than

forty-five (45) days to remedy any such failure to substantially perform his

material duties, or

 

1.3.1.2  the willful engaging by

the Employee in misconduct which is materially injurious to the Company,

monetarily or otherwise.

 

1.3.2            No act, or failure

to act, on the Employee’s part shall be considered “willful” unless done, or

omitted to be done, by him not in good faith and without reasonable belief that

his action or omission was in the best interest of the Company.

 

1.3.3            Notwithstanding the

foregoing, the Employee shall not be deemed to have been terminated for Cause

without (i) reasonable notice to the Employee setting forth the reasons for the

Company’s intention to terminate for Cause, and (ii) delivery to the Employee

of a Notice of Termination from the Board finding that in the good faith

opinion of the Board the Employee was guilty of conduct set forth above in

clause 1.3.1.1 or 1.3.1.2 hereof, and specifying the particulars thereof in

detail.

 

1.4          Change in Control.  A “Change in Control” of the Company shall

occur if:

 

1.4.1            any person (as

defined in Sections 3(a)(9) and 13(d)(3) of the ‘34 Act) becomes the

“beneficial owner” (as defined in Rule 13d-3 promulgated pursuant to the ‘34

Act), directly or indirectly, of 35% or more of combined voting power of the

Company’s then outstanding securities; provided, however, that if any such person

is now the beneficial owner of 35% or more of such voting power as of the date

of execution of this Agreement, the present existence of such ownership shall

not constitute a “Change in Control” unless such person changes in identity or

composition or the same person becomes the beneficial owner, directly or

indirectly, of 50% of such voting power;

 

1.4.2            the occurrence

within any twelve (12)-month period during the term of the Agreement of a

change in the Board with the result that the Incumbent Members do not

constitute a majority of the Board;

 

1.4.3            the shareholders of

the Company approve an agreement to merge or consolidate with or into another

corporation, but only if such transaction results in an immediate change in the

Board as described in clause 1.4.2; and, if the Board does not so

 

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change, the resulting entity shall be deemed a Successor and shall

thereafter be liable for all of the Company’s obligations hereunder; or

 

1.4.4            an agreement to

sell or otherwise dispose of all or substantially all of the Company’s assets

(including a plan of liquidation).

 

1.5        Code.     “Code” shall mean the Internal Revenue Code

of 1986, as amended (or any successor provision) and any Treasury Regulations

issued thereunder.

 

1.6        Date of Termination.  “Date of Termination” shall mean:

 

1.6.1            if the Employee’s

employment is terminated by the Company for Disability, thirty (30) days after

Notice of Termination is given to the Employee (provided that the Employee

shall not have returned to the performance of the Employee’s duties on a

full-time basis during such thirty (30)-day period); or

 

1.6.2            if the Employee’s

employment is terminated by the Company for any other reason, the date on which

a Notice of Termination is delivered to the Employee; provided that if within

thirty (30) days after any Notice of Termination is delivered to the Employee

by the Company the Employee notifies the Company that a dispute exists

concerning the termination, the Date of Termination shall be the date the

dispute is finally determined, whether by mutual agreement by the parties, by

one or more qualified medical doctors in the case of Disability, or upon final

judgment, order or decree of a court of competent jurisdiction (the time for

appeal therefrom having expired and no appeal having been perfected).  Nothing contained in this paragraph shall be

construed to give the Employee any right to continued employment, salary or

benefits during any period such dispute is being decided.

 

1.7        Disability. “Disability”

shall mean the Employee’s inability to substantially perform his material

duties on a full-time basis for twelve (12) consecutive months due to physical

or mental illness, if within thirty (30) days after Notice of Termination is

thereafter given by the Company the Employee shall not have returned to the

full-time performance of the Employee’s duties; provided, however, that if

Employee shall not agree with a determination to terminate him because of

Disability, the question of Employee’s ability shall be subject to the

certification of a qualified medical doctor agreed to by the Company and the

Employee or, in the event of the Employee’s incapacity to designate a doctor,

the Employee’s legal representative.  In

the absence of agreement between the Company and the Employee, each party shall

nominate a qualified medical doctor and the two doctors shall select a third

doctor, who shall make the determination as to Dis­ability.

 

1.8        Factor.  For purposes of this Agreement, the Factor

shall be 3.

 

1.9        Good Reason.  Termination for “Good Reason” shall mean one

or more of the following:

 

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1.9.1            a demeaning or a

material adverse involuntary change in Employee’s duties, status, title or

position as an Employee or officer of the Company, such as the removal of the

Employee as an officer, manager, etc. which position the Employee held at the

time of the Change of Control.  For

purposes of this section, the fact that the Company is a subsidiary of an

acquirer or a division of an acquirer shall not in and of itself be considered

a material change to the Employee’s duties, status, titles or position and any

change in titles to make such title consistent with those of an acquirer shall

not in and of itself be considered a material change to the Employee’s duties,

status, titles or position, duties, responsibilities; or

 

1.9.2            a reduction by the

Company in the Employee’s base salary as in effect on the date hereof or as the

same may be increased from time to time during the term of this Agreement or

the Company’s failure to increase (within twelve (12) months of the Employee’s

last increase in base salary) the Employee’s base salary after a Change in

Control of the Company in the amount which at least equals, on a percentage

basis, the average percentage increase in base salary for all similarly

situated Employees of the Company effected in the preceding twelve (12) months

or a change in the eligibility requirements or performance criteria under any

Plan under which Employee is covered as of the Effective Date, which adversely

affects Employee and is not substantially cured as provided in Section 1.9.3;

or

 

1.9.3            any failure by the

Company to continue in effect any benefit plan or arrangement (including,

without limitation, the Company’s Profit Sharing Plan, group life insurance

plan, and medical, dental, accident and disability plans) in which the Employee

is participating at the time of a Change in Control of the Company (or any

other plans providing the Employee with substantially similar benefits)

(hereinafter referred to as “Benefit Plans”), or the taking of any action by

the Company which would adversely affect the Employee’s participation in or

materially reduce, in the aggregate, the Employee’s benefits under any such

Benefit Plan or deprive the Employee of any material fringe benefit enjoyed by

the Employee at the time of a Change in Control of the Company (unless the

Company or the acquirer provide substantially similar benefits  to the Employee under other plans, or

provides benefits (including cash payments) which are in the aggregate  comparable financially to the aggregate

benefits provided under the Benefit Plans on an after tax basis; or

 

1.9.4            any failure by the

Company to continue in effect any incentive plan or arrangement (including,

without limitation, the [Company’s Senior Management Incentive Plan], bonus and

contingent bonus arrangements and credits and the right to receive performance

awards and similar incentive compensation benefits) in which the Employee is

participating at the time of a Change in Control of the Company (or any other

plans or arrangements providing him with substantially similar benefits)

(hereinafter referred to as “Incentive Plans”) or the taking of any action by

the Company which would adversely affect the Employee’s participation in any

such Incentive Plan or reduce in the aggregate the Employee’s benefits under

any such Incentive Plan (unless the Company or the acquirer provide

substantially similar benefits to the Employee under other plans); or

 

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1.9.5            any failure by the

Company to continue in effect any plan or arrangement to receive securities of

the Company (including, without limitation, the Company’s 1993 Stock Option Plan

and any other plan or arrangement to receive and exercise stock options, stock

appreciation rights, restricted stock or grants thereof) in which the Employee

is participating at the time of a Change in Control of the Company (or plans or

arrangements providing him with substantially similar benefits) (hereinafter

referred to as “Securities Plans”) or the taking of any action by the Company

which would adversely affect the Employee’s participation in or materially

reduce the Employee’s benefits under any such Securities Plan; or change in the

plan which would or could have a material adverse affect on the amount, timing

and condition of benefits which the Employee may receive under the Plan (unless

the Company or the acquirer provide substantially similar benefits  to the Employee under other plans); or

 

1.9.6            a transfer of the

Employee’s place of work to a location which is more than fifty miles from the

Employee’s place of work at the time of the Change of Control; or

 

1.9.7            the Employer

requires the Executive to travel on Employer business 20% in excess of the

average number of days per month the Executive was required to travel during

the 180-day period prior to the Change of Control of the Company exclusive of

travel necessitated primarily by the Change of Control; or

 

1.9.8            any failure by the

Company to provide the Employee with the number of paid personal paid leave

days or vacation or sick days to which the Employee is entitled at the time of

a Change in Control of the Company; or

 

1.9..9           any material breach

by the Company of any provision of this Agreement; or

 

1.9.10          any failure by the

Company to obtain the assumption of this Agreement by any successor or assign

of the Company; or

 

1.9.11          any purported

termination of the Employee’s employment which is not effected pursuant to a

Notice of Termination and for purposes of this Agreement, no such purported

termination shall be effective.

 

1.10      Incumbent Members.  “Incumbent Members” in respect of any twelve

(12)-month period, shall mean the members of the Board on the date immediately

preceding the commencement of such twelve (12)-month period, provided that any

person becoming a Director during such twelve (12)-month period whose election

or nomination for election was supported by a majority of the Directors who, on

the date of such election or nomination for election, comprised the Incumbent

Members shall be considered one of the Incumbent Members in respect of such

twelve (12)-month period.

 

1.11      Notice of Termination.  A “Notice of Termination” shall mean a

written notice which shall indicate those specific termination provisions in

this Agreement relied upon and which sets forth in reasonable detail the facts

and circumstances claimed to provide a basis for termination of

 

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the Employee.  Any and all

terminations by the Company shall be communicated by a Notice of Termination.

 

1.12      ‘34 Act.  “ ‘34 Act” shall mean the Securities

Exchange Act of 1934, as amended (or any successor provision).

 

2.             Term.   This Agreement shall commence on the

Effective Date first above written and shall continue in effect until

terminated as provided below.

 

2.1        Both parties may

terminate this Agreement by mutual consent.

 

2.2        The Company may terminate

this Agreement on not less than thirty (30) days prior written notice, provided

however, that this Agreement shall not terminate earlier than the date which is

ninety (90) days after the Effective Date.

 

3.             Severance Compensation upon a

Change of Control and Termination of Employment.

 

3.1        If (a) a Change in

Control of the Company shall have occurred while the Employee is an employee of

the Company, and (b) within the two (2)-year period beginning on the date of

such Change in Control (i) the Company shall terminate the Employee’s

employment other than for death, Disability, or Cause (it being understood that

a purported termination for Disability or for Cause which is finally determined

not to have been proper shall not be a termination for Disability or for

Cause), or (ii) the Employee shall terminate his employment for Good Reason,

the Company shall provide the Employee with the payments and benefits set forth

below.

 

3.2        If (a) the Company

terminates the Employee’s employment within three (3) months before the earlier

of (i) public notice of a transaction that, if consummated, would constitute a

Change of Control or a Change of Control occurs within two (2) years of such an

announcement, (ii) a letter of intent regarding a transaction that, if

consummated, would be a Change of Control or a Change of Control occurs within

two (2) years of such letter of intent, or (iii) a definitive agreement

regarding a transaction that, if consummated, would be a Change of Control or a

Change of Control occurs within two (2) years of such a definitive agreement,

and (b) such termination occurred for any reason other than for death,

Disability, or Cause (it being understood that a purported termination for

Disability or for Cause which is finally determined not to have been proper

shall not be a termination for Disability or for Cause), the Company shall

provide the Employee with the payments and benefits set forth below.

 

3.3        If the Employee shall

have terminated his employment for Good Reason three (3) months before the

earlier of (i) public notice of a transaction that, if consummated, would

constitute a Change of Control or a Change of Control occurs within two (2)

years of such an announcement, (ii) a letter of intent regarding a transaction

that, if consummated, would be a Change of Control or a Change of Control

occurs within two (2) years of such letter of intent, or (iii) a definitive

agreement regarding a transaction that, if consummated, would be a Change of

Control or a Change of Control

 

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occurs within two (2) years of such a definitive agreement, the Company

shall provide the Employee with the payments and benefits set forth below

 

3.4        The Company shall pay the

Employee any earned and accrued but unpaid installment of base salary through

the Date of Termination at the rate in effect at the time Notice of Termination

is given and all other unpaid amounts to which the Employee is entitled as of

the Date of Termination under any compensation plan or program of the Company,

including, without limitation, all accrued vacation time; such payments to be

made in a lump sum on or before the fifth (5th) day following the

Date of Termination;

 

3.5        In lieu of any further

salary payments to the Employee for periods subsequent to the Date of

Termination and in exchange for the non-compete and other covenants by the

Employee set forth below, the Company shall pay to the Employee an amount equal

to [(A)] the product of (i) the sum of the Employee’s Annual Cash Compensation

and (ii) the Factor [less, (B) One Dollar]; such amount shall be paid in equal

monthly installments over the Applicable Period with the first such payment due

on or before the fifth calendar day following the Date of Termination or the

Change of Control, whichever is later, with all subsequent payments due on the

applicable anniversary of the first such payment.

 

3.6        During the Applicable

Period, the Company will reimburse the Employee for all reasonable expenses

incurred by him (but not including any arrangement by which the Employee prepays

expenses for a period of greater than thirty (30) days) in seeking employment

with another Company including the fees of a reputable outplacement

organization, not to exceed the greater of $10,000.00 or 10% of the Employee’s

Annual Cash Compensation.  The Company’s

obligation hereunder shall terminate after the Employee employment by another

employer.

 

3.7        During the Applicable

Period (or such greater period of time as may be required by law), the Company

shall maintain in full force for the continued benefit of the Employee and

effect and shall pay the entire cost of providing benefits to the Employee and

his family, all employee welfare benefit plans and perquisite programs in which

the Employee was entitled to participate immediately prior to the Date of

Termination provided that the Employee’s continued participation is possible

under the general terms and provisions of such plans and programs.  In the event that the Employee’s

participation in any such plan or program is barred, the Company shall, at its

sole cost and expense, arrange to provide at the Company’s cost, the Employee

with benefits substantially similar to those which the Employee would otherwise

have been entitled to receive under such plans and programs from which his

continued participation is barred.  The

Company’s obligations hereunder shall be offset by any benefits the Employee

receives from a new employer.

 

3.8        Except as provided below,

the Company shall vest and make immediately exercisable all stock options

granted by the Company to the Employee for the acquisition of the Company’s

stock, or at the Employee’s option, pay to the Employee an amount equal to the

amount (less the exercise price, if any, for such stock subject to the options)

which the Employee would have been entitled to receive had such options been

immediately vested and exercisable plus the amount, if any, which would put the

Employee in the net after tax position if the options were immediately vested

 

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and exercised and the Employee had exercised such options; and the

Company shall cause all stock issuable pursuant to such options to be

immediately tradeable upon the applicable stock exchange upon receipt by the

Employee.  Notwithstanding the

foregoing, no such vesting or payment shall be required as and to the extent

such vesting or payment would prevent Apooling@ accounting as provided in

Section 8.6.

 

3.9        The Company shall fully

vest and make distributable all accrued benefits of the Employee under all

employee pension benefit plans (401(k) and profit sharing plan) in which the

Employee was entitled to participate immediately prior to the Date of

Termination.  In the event that such

vesting is not permitted by applicable law, the Company shall, at its sole cost

and expense, arrange to provide at the Company’s cost, the benefits

substantially similar to those which the Employee would otherwise have been

entitled to receive under such plans and programs if such benefits were fully

vested and distributable.

 

4.             Mitigation: No

Effect on Other Contractual Rights.

 

4.1        The Employee shall use

reasonable efforts to find comparable employment in terms of location, status,

duties, position, salary and incentive compensation, benefits and plans.

 

4.2        Except as provided above,

the Employee shall not be required to mitigate damages or the amount of any

payment provided for under this Agreement by seeking other employment or

otherwise, nor shall the amount of any payment provided for under Sections 3.1,

3.2 or 3.3 of this Agreement be reduced by any compensation earned by the

Employee as the result of employment by another Company after the Date of

Termination, or otherwise.

 

4.3        If the Employee is

engaged by the Company or an affiliate as a consultant upon the Date of

Termination, the amounts payable under this Agreement shall be adjusted based

upon the amount paid to the Employee as a consultant by the Company in the

following manner, the amount payable under Section 3.5 shall be multiplied by a

fraction the numerator of which is the Employee’s Annual Cash Compensation as

defined herein multiplied by the Factor minus the aggregate amount which the

Company unconditionally agrees to pay to the Employee as a Consultant during

the Applicable Period and the numerator of which is the Annual Cash

Compensation as defined herein multiplied by the Factor. 

 

4.4        Except as expressly

provided herein, the provisions of this Agreement, and any payment provided for

hereunder, shall not reduce any amounts otherwise payable, or in any way

diminish the Employee’s existing rights, or rights which would accrue solely as

a result of the passage of time, under any Benefit Plan, Incentive Plan or

Securities Plan, employment agreement or other contract, plan or arrangement.

 

5.             Assumption by

Successor to the Company.

 

5.1        The Company will require

any successor or assign (whether direct or indirect, by purchase, merger,

consolidation or otherwise) to all or substantially all of the business and/or

assets

 

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of the Company, by agreement in form and substance satisfactory to the

Employee, expressly, absolutely and unconditionally to assume and agree to

perform this Agreement in the same manner and to the same extent that the

Company would be required to perform it if no such succession or assignment had

taken place.  Any failure of the Company

to obtain such agreement prior to the effectiveness of any such succession or

assignment shall be a material breach of this Agreement and shall entitle the

Employee to terminate the Employee’s employment for Good Reason. As used in

this Agreement, “Company” shall mean the Company as hereinbefore defined and

any successor or assign to its business and/or assets as aforesaid which

executes and delivers the agreement provided for in this Section 5 or which

otherwise becomes bound by all the terms and provisions of this Agreement by

operation of law.  If at any time during

the term of this Agreement the Employee is employed by any corporation a

majority of the voting securities of which is then owned by the Company,

“Company” as used in this Agreement shall in addition include such

Company.  In such event, the Company

agrees that it shall pay or shall cause such Company to pay any amounts owed to

the Employee pursuant to Section 3 hereof.

 

5.2        This Agreement shall

inure to the benefit of and be enforceable by the Employee’s personal and legal

representatives, executors, administrators, successors, heirs, distributees,

devisees and legatees.  If the Employee

should die while any amounts are still payable to him hereunder, all such

amounts, unless otherwise provided herein, shall be paid in accordance with the

terms of this Agreement to the Employee’s devisee, legatee, or other designee

or, if there be no such designee, to the Employee’s estate.

 

6.             Company’s Right to

Terminate Employment. 

Notwithstanding anything contained in this Agreement to the contrary,

except to the extent that the Employee has a written employment agreement with

the Company, the Company may terminate the Employee’s employment at any time,

for any reason or no reason, and no provision contained herein shall affect the

Company’s ability to terminate the Employee’s employment at any time, with or

without Cause. Nothing in this Agreement shall in any way require the Company

to provide any of the benefits specified in this Agreement prior to a Change in

Control, nor shall this Agreement be construed in any way to establish any

policies or other benefits for the Employee or any other employee of the

Company whose employment with the Company is terminated prior to a Change in

Control.

 

7.             Documents,

Confidentially, Non–Compete

 

7.1        Definition.  For purposes of this Section 7 the term

“Company” shall include Osmonics and any and all subsidiaries of the foregoing

and any entities related through common controlling ownership to Osmonics.

 

7.2        Documents.  Employee shall not (except in the

performance of his duties hereunder) at any time or in any manner, make or

cause to be made any copies, pictures, duplicates, facsimiles or other

reproductions or recordings or any abstracts or summaries of any reports,

studies, memoranda, correspondence, manuals, records, plans or other written,

printed or otherwise recorded materials of any kind whatever belonging to or in

the possession of Company or of any affiliate of Company or any customer or

client of Company.  Employee shall have

no right, title or interest in

 

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any such material, and Employee agrees that (except in the performance of

his duties under this Agreement) he will not, without the prior written consent

of Company, remove any material from the premises of Company or any affiliate

of Company and that he will surrender all such material to Company immediately

upon the termination of his employment or at any time prior thereto upon the

request of Company.

 

7.3        Proprietary

Information, Confidentiality. Without the prior written consent of Company

(which may be withheld with or without reason), Employee shall not at any time

(after the date hereof, whether during or after his employment with Company),

directly or indirectly, use for his own benefit or purposes or for the benefit

or purposes of any other person, firm, partnership, association, corporation or

business organization, entity or enterprise, or disclose (except in the

performance of his duties hereunder) in any manner to any person, firm,

partnership, association, corporation or business organization, entity or

enterprise, any trade secrets, information, data, know–how or knowledge

(including, but not limited to, that relating to costs, products, equipment,

merchandising and marketing methods, suppliers, customers, personnel training

programs, business expansion plans or financing) which is proprietary to

Company or any affiliate of Company or any client or customer of Company. This

Section 7.3 shall not apply to any such data, information, know–how or

knowledge which (a) is publicly known or which hereafter becomes publicly known

through no fault of Employee; or (b) the disclosure of which is legally

compelled.  Employee acknowledges that

Company intends any and all information referred to above to be proprietary

unless a policy to the contrary is adopted by Company’s Board of Directors.

 

7.4        Improvements and

Inventions.

 

7.4.1              Notification

and Disclosure.  Employee shall

promptly notify Company in writing of the existence and nature of, and shall

promptly and fully disclose to Company, any and all ideas, improvements and

inventions, whether or not they are believed to be patentable (all of which are

hereinafter sometimes referred to as “Inventions”), which Employee has

conceived or first actually reduced to practice and/or may conceive or first

actually reduce to practice during the period of Employee’s employment or which

Employee may conceive or reduce to practice within one (1) year after

termination of employment, if such Inventions relate to a product or process

upon which Employee worked during his last three (3) years of employment by

Company.  An Invention for which no equipment,

supplies, facility or trade secret information of Company was used and which

was developed entirely on Employee’s own time, and which does not relate to the

business of Company or to Company’s actual or demonstrably anticipated research

or development, or which does not result from any work performed by Employee

for Company is not considered to be the property of Company.

 

7.4.2              Ownership of

Inventions and Work Product.  All

such Inventions and all right, title, and interest of every kind and nature,

whether now known or unknown, in and to any intellectual property, including,

but not limited to, any computer software programs, trademarks, service marks,

copyrights, films, scripts, ideas, creations, and properties invented, created,

written, developed, furnished, produced, or disclosed by Employee, in the

course of rendering services to Company under and pursuant to this Agreement

(hereinafter

 

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“Work Product”) shall be the sole and exclusive property of Company or

its nominee, and during the term of his employment and thereafter, whenever

requested to do so by Company, Employee shall execute and assign any and all

applications, assignments and other instruments which Company shall deem

necessary or convenient in order to apply for and obtain Letters Patent or

Copyright Registration of the United States and/or of any foreign countries for

such Inventions and/or Work Product and in order to assign and convey to

Company or its nominee the sole and exclusive right, title and interest in and

to such inventions, and Employee will render reasonable aid and assistance in

any interference or litigation pertaining thereto, all expenses reasonably

incurred by Employee at the request of Company to be borne by Company, provided

such aid assistance does not unreasonably interfere with Employee’s then

current employment.  In this connection,

as to work which requires Employee’s time after termination of his employment,

Employee shall be entitled to compensation for the time requested by Company at

an hourly rate equal to the pro rata hourly rate at which Employee is being

paid for a normal pay period immediately prior to the request for

services.  All Inventions and Work Product

resulting from Employee’s employment by Company shall be considered “work for

hire” for purposes of the United States copyright laws.

 

7.5        Covenant Not to

Compete.

 

7.5.1              Employee hereby

agrees that, during the Applicable Period, the Employee shall not, without

Company’s prior written consent (which may be withheld with or without reason),

“engage or be interested, directly or indirectly” (as hereinafter defined),

whether alone or together with or on behalf of or through any “other entity”

(as hereinafter defined), whether as sole proprietor, partner, investor,

stockholder, or any type of principal whatever, or as agent, officer, director,

employee, technical advisor (except as he is employed by Company), lender,

trustee, beneficiary, or otherwise, in any phase of the Restricted Business (as

hereinafter defined) with any “customer” in the States where Company engages in

its businesses in the United States or any other country in which Company has

conducted its Restricted Business at any time during the three (3) year period

prior to Date of Termination (hereinafter the “Reference Period”).

 

7.5.2              The term

ARestricted Business@ as used herein means any business any part of which

consists of (a) manufacturing, sale or distribution of any product

substantially similar to or otherwise competitive with a product manufactured,

sold or distributed by any subsidiary, division or business unit of the Company

during the Reference Period, and (b) any business of a kind in whole or in part

similar to and competitive with that engaged in by Company during the Reference

Period.

 

7.5.3              The term “Other

Entity” as used herein means any person, firm, partnership, association, trust,

venture, corporation or business organization, entity or enterprise, or any

combination thereof.

 

12

 

 

7.5.4              The term “engage

or be interested, directly or indirectly” as used herein shall include, without

limitation, giving advice or technical or financial assistance by loan,

guarantees, stock transactions or in any other manner or to any other entity

doing or about to do such restricted business in the area covered by this

Agreement; but shall not by itself include the ownership of less than one

percent (1%) of the outstanding stock of a corporation the shares of which are

publicly traded.

 

7.5.5              The duration of

the foregoing covenant shall be extended beyond the time period set forth

therein for a period equal to the duration of any breach or default of such

covenant by Employee.

 

7.5.6              Notwithstanding

the forgoing, upon request, which request shall not be unreasonably denied,

Employee may enter the employment of another who was a customer of Company

during the Reference Period, provided that such customer is not engaged in the

restricted business in a manner competitive with the Company, and provided,

that the position would not involve the design or construction of products

which would be competitive to the products designed and manufactured by the

Company.

 

7.6        Business Relationships.   Employee hereby agrees that, during the

Applicable  Period, the Employee shall

not, without prior written consent of Company (which may be withheld with or

without reason):

 

7.6.1              request, induce,

advise or encourage any customer or supplier, or any other entity having

business dealings with Company, to the extent such business dealings are in

connection with the restricted business, to withdraw, curtail or cancel such

business dealings; or

 

7.6.2              hire as employee

or independent contractor, or request, induce, advise or encourage a

termination of employment by, any other employee of Company, whether acting

directly or indirectly and whether acting alone or together with or on behalf

of or through any other entity.

 

8.             Miscellaneous.

 

8.1             Notice.            For purposes of this Agreement,

notices and all other communications provided for in the Agreement shall be in

writing and shall be deemed to have been duly given when delivered or mailed by

United States registered mail, return receipt requested, postage prepaid, as

follows:

 

13

 

If to the Company:

 

Osmonics, Inc.

5951 Clearwater Drive

Minnetonka, Minnesota 55343

Attn: D. Dean Spatz

 

With a copy to:

 

Maslon Edelman Borman & Brand,

a Professional Limited Liability Partnership

3300 Norwest Center

Minneapolis, Minnesota 55402-4140

Attn: Larry A. Koch

 

If to the Employee, at the most recent address provided by the Employee

to the Company or such other address as either party may have furnished to the

other in writing in accordance herewith, except that notices of change of address

shall be effective only upon receipt.

 

8.2             Waiver,

Modification.  No provisions of this

Agreement may be modified, waived or discharged unless such waiver,

modification or discharge is agreed to in writing signed by the Employee and

such officer of the Company as may be specifically designated by the

Board.  No waiver by either party hereto

at any time of any breach by the other party hereto of, or in compliance with,

any condition or provision of this Agreement to be performed by such other

party shall be deemed a waiver of similar or dissimilar provision or conditions

at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, express or

implied, with respect to the subject matter hereof have been made by either

party which are not set forth expressly in this Agree­ment.  This Agreement shall be governed by and

construed in accordance with the laws of the State of Minnesota.

 

8.3             Severability.  The invalidity or unenforceability of any

provisions of this Agreement shall not affect the validity or enforceability of

any other provision of this Agreement, which shall remain in full force and

effect.

 

8.4             Counterparts.  This Agreement may be executed in one or

more counterparts, each of which shall be deemed to be an original but all of

which together will constitute one and the same instrument.

 

8.5             Arbitration.  Except as provided herein for injunctive

relief, in the event of any dispute concerning or arising out of this

Agreement, such dispute shall be submitted by the parties to arbitration.  Arbitration proceedings may be commenced by

either party giving the other party written notice thereof and proceeding

thereafter in accordance with the rules and procedures of the American

Arbitration Association.  Any such arbitration

shall take place before a single arbitrator in

 

14

 

the city nearest the Employees last place of employment with the

Company.  Any such arbitration shall be

governed by and subject to the applicable laws of the State of Minnesota

(including the discovery provisions of Minnesota and the Minnesota Code of

Civil Procedure), and the then prevailing rules of the American Arbitration

Association.  The arbitrator’s award in

any such arbitration shall be final and binding, and a judgment upon such award

may be enforced by any court of competent jurisdiction. Except as provided

above and in the following sentence, one–half (2) of the cost of

arbitration shall be paid by each party, except that each party shall be liable

for its own attorneys’ fees and other expenses incurred directly by it.  However, the arbitrator may, in his or her

discretion, award expenses and attorneys’ fees to the prevailing party as

determined by the arbitrator.

 

8.6             Pooling.  No provision of this Agreement shall be

enforceable to the extent such provision prevents “pooling” accounting in

connection with any “Change of Control” with respect to which the Company’s

Board of Directors determines that “pooling” accounting should be used, unless

such provision is affirmed by action of the Company’s Board of Directors.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the

Effective Date and year first above written.

 

	

   

  	

  OSMONICS, INC.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By

  	

  /s/ D. Dean Spatz

  	

   

  
	

   

  	

  Its

  	

  CEO

  

 

15

 

Schedule of Executives / Officers with substantially identical change in

control agreements and their applicable period:

 

	

  Executives / Officers

  	

   

  	

  Applicable

  Period

  
	

  Edward J. Fierko

  	

   

  	

  3

  
	

  Keith B. Robinson

  	

   

  	

  3

  
	

  Roger S. Miller

  	

   

  	

  2

  
	

  Curtis D. Weitnauer

  	

   

  	

  2

  
	

  Richard F. Elliott

  	

   

  	

  2

  
	

  L. Lee Runzheimer

  	

   

  	

  1

  

 

16May 15, 2001

EXHIBIT

10 (d)

 

October 5, 2001

 

Mr. Philip M. Rolchigo

Osmonics, Inc.

Fairfield Facilities

218 Little Falls Road

Cedar Grove, NJ  07009-1277

 

Dear Phil:

 

This letter will confirm our prior conversation.  I am happy to confirm that, as we discussed,

if you continue your employment with Osmonics, Inc. (the “Company”) through

July 31, 2001, the Company will pay you upon your termination of employment at

any time after July 31, 2001, a lump sum payment in the amount of $305,000 (the

“2001 Noncompetition Payment”).  Your

2001 Noncompetition Payment will be made within forty-eight (48) hours after

your termination of employment with the Company.  In consideration of the Company’s payment to you of the 2001

Noncompetition Payment you agree that, during the one year period beginning on

your termination of employment, you will not, without the Company’s prior

written approval, which approval shall not be unreasonably withheld: (i)

compete with the Company in the separations and filtration industry within the

markets which the Company is serving at the time of the termination of your

employment, (ii) divulge or use the Company’s confidential information, (iii)

solicit or otherwise assist anyone in hiring any of the Company’s employees,

nor (iv) interfere with or assist anyone in interfering with any of the

Company’s business relationships.

 

As we also discussed, if you remain in the employment of the Company

through July 31, 2002, the Company will pay you upon termination of your

employment with the Company at any time thereafter, the sum of three (3) times

your annual base salary plus your annual incentive target bonus for the fiscal

year in which your employment with the Company terminates (the “2002

Noncompetition Payment”) in addition to the 2001 Noncompetition Payment. The

2002 Noncompetition Payment will be paid in sixteen consecutive equal quarterly

payments.  The first payment will be due

on the last day of the first calendar quarter ending after your termination of

employment with the Company. In consideration of the Company’s payment to you

of the 2002 Noncompetition Payment, you agree that, during the four year period

beginning with your termination of employment, you will not, without the

Company’s prior written approval, which approval shall not be unreasonably

withheld: (i) compete with the Company in the separations and filtration

industry within the markets which the Company is serving at the time of the

termination of your employment, (ii) divulge or use the Company’s confidential

information, (iii) solicit or otherwise assist anyone in hiring any of the

Company’s employees, nor (iv) interfere

 

1

 

 

with or assist anyone in interfering with any of the Company’s business

relationships. The 2002 Noncompetition Payments will cease if you breach your

obligations not to compete, not to disclose confidential information, not to

hire the Company’s employees, and not to interfere with the Company’s business

relationships.

 

You agree to notify the Company of any employment or consulting

arrangement you intend to accept prior to your acceptance and the Company

agrees to promptly review the proposed employment or consulting arrangement and

to notify you if it reasonably believes that such employment or consulting

would violate your obligation set forth above.

 

You will be entitled to your 2001 and 2002 Noncompetition Payments even

if the Company terminates your employment as long as the Company’s termination

of your employment is not for cause. 

Only your (i) embezzlement from the Company, (ii) commission of a felony

which materially harms the Company finances or its reputation, (iii) breach of

your obligation not to disclosure or use the Company’s confidential information

or (iv) breach of your obligations set forth below, will constitute cause.

 

Further, as we discussed, if at any time the Company wrongfully fails

to pay you your 2001 Noncompetition Payment or 2002 Noncompetition Payment, the

Company will be responsible for any and all legal fees you incur in enforcing

your rights under this agreement.  In

addition, if the Company wrongfully fails to pay your 2002 Noncompetition

Payment, the Company will be obligated to pay you twice the amount of 2002

Noncompetition Payment as liquidated damages.

 

It is further agreed that the amount of time you are required to spend

outside of your home state of New Jersey in connection with your employment

with the Company will be determined by you in the exercise of your professional

judgment.  However, in no event will you

be required to spend fifty percent (50%) or more of your time outside of New

Jersey so that you will be able to satisfy your custody requirements under your

50-50 joint custody arrangement with your spouse under your pending divorce.

 

After your termination of employment with the Company, and during the

three (3) year period beginning with the date of  your termination of employment, you agree to offer the Company a

first right of refusal to buy any invention created by you after your

termination of employment which involves separation and filtration in the

market then served by the Company.

 

If this letter agrees with your understanding of our discussion, please

sign this letter below where indicated and return a copy to me as soon as

possible.  This letter supercedes all

prior agreements between you and the company and the payments to be made

hereunder are in lieu of any and all other payments to be made to you under any

other plan providing for payments upon or as a result of  your termination of employment other than those

payments due under the company’s 

 

2

 

 

 

401(k) plan or stock option plan.

 

I appreciate this opportunity to continue to work with you and to have

you assist the Company in developing and transitioning the development of those

products with which you have been involved to your successor.

 

Sincerely,

 

	

  OSMONICS, INC.

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  /s/ Michael L. Snow

  	

   

  	

   

  
	

  Michael L. Snow

  	

   

  
	

  Chairman, Compensation Committee

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
			

 

Agreed to and accepted this 

5  day of  Oct 

2001.

 

	

   

  	

   

  
	

   

  	

   

  
	

   /s/ Philip

  M. Rolchigo

  	

   

  	

   

  
	

  Philip M. Rolchigo

  	

   

  
	

   

  	

   

  
			

 

3

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