UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period ________ to ________
Commission file number 1-7007
BANDAG, INCORPORATED
(Exact name of registrant as specified in its charter)
Iowa 42-0802143
(State of incorporation) (I.R.S Employer Identification No.)
2905 N. HWY. 61, Muscatine, Iowa 52761-5886
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: 319/262-1400
Not Applicable
(Former name, address, or fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No ___.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $1 par value; 9,085,432 shares as of July 31, 1999.
Class A Common Stock, $1 par value; 10,781,844 shares as of July 31, 1999.
Class B Common Stock, $1 par value; 2,045,812 shares as of July 31, 1999.
Page 1 of 4
<PAGE>
The undersigned registrant hereby amends and restates Item 6 of Part II of its
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 to provide in
its entirety as follows:
PART II
OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Severance Agreement, dated as of May 4, 1999, by and
between Bandag, Incorporated and Martin G. Carver
10.2 Severance Agreement, dated as of May 4, 1999, by and
between Bandag, Incorporated and Nathaniel L. Derby, II
10.3 Severance Agreement, dated as of May 4, 1999, by and
between Bandag, Incorporated and Sam Ferrise, II
10.4 Severance Agreement, dated as of May 4, 1999, by and
between Bandag, Incorporated and Warren W. Heidbreder
10.5 Severance Agreement, dated as of May 4, 1999, by and
between Bandag, Incorporated and John C. McErlane
10.6 Bandag, Incorporated Stock Award Plan
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on July 22, 1999. The
Current Report included unaudited condensed consolidated balance
sheets for the quarter ended June 30, 1999 and the year ended
December 31, 1998, unaudited condensed consolidated statements of
earnings for the three and six-month periods ended June 30, 1999
and 1998, respectively, and unaudited condensed consolidated
statements of cash flows for the six months ended June 30, 1999
and 1998.
Page 2 of 4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
BANDAG, INCORPORATED
(Registrant)
Date: September 1, 1999 /s/Martin G. Carver
Martin G. Carver
Chairman and Chief Executive Officer
Date: September 1, 1999 /s/Warren W. Heidbreder
Warren W. Heidbreder
Vice President, Chief
Financial Officer
Page 3 of 4
<PAGE>
BANDAG, INCORPORATED AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit Number Exhibit Page
- -------------- ------- ----
10.1 Severance Agreement, dated as of May 4, 1999,
by and between Bandag, Incorporated and
Martin G. Carver
10.2 Severance Agreement, dated as of May 4, 1999,
by and between Bandag, Incorporated and
Nathaniel L. Derby, II
10.3 Severance Agreement, dated as of May 4, 1999,
by and between Bandag, Incorporated and Sam Ferrise, II
10.4 Severance Agreement, dated as of May 4, 1999,
by and between Bandag, Incorporated and
Warren W. Heidbreder
10.5 Severance Agreement, dated as of May 4, 1999,
by and between Bandag, Incorporated and
John C. McErlane
10.6 Bandag, Incorporated Stock Award Plan
Page 4 of 4
EXHIBIT 10.1
BANDAG, INCORPORATED
SEVERANCE AGREEMENT FOR MARTIN G. CARVER
THIS SEVERANCE AGREEMENT ("Agreement") is entered into as of the 4th
day of May, 1999, by and between Bandag, Inc. ("Bandag" or "Company"), an Iowa
corporation, and Martin G. Carver ("Employee").
RECITALS
WHEREAS, Employee is and has been an at-will executive employee of
Bandag, and possesses an extensive knowledge of the business and affairs of
Bandag, its proprietary information, trade secrets, policies, methods,
personnel, and problems;
WHEREAS, Employee desires to continue to be employed at-will by
Bandag, and acknowledges that this Agreement provides for severance payments to
which he is not otherwise entitled by any contract or any other legal
obligation;
WHEREAS, the parties agree and acknowledge that this Agreement is not
intended to constitute an employment contract; does not create any employment
rights other than those expressly set forth herein; does not alter or modify
Employee's status as an "at-will" employee of Bandag or the terms and conditions
of his employment except as expressly set forth herein, and does not create any
rights to continued employment or to termination only "for cause"; but rather,
is intended solely to provide for the availability of severance payments to
Employee under the terms and conditions set forth herein in consideration and
exchange for Employee's agreement to be bound by the Non-Competition and
Confidentiality provisions contained in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements of
the parties herein contained, the sufficiency of which is acknowledged by each
party, the parties hereto agree as follows:
1. Employee Covenants. Employee covenants and agrees to be bound by the
terms of the Non-Competition and Confidentiality provisions set forth
in paragraph 2, below.
2. Covenant Not to Compete and Confidentiality.
a. Recognizing that Employee will, during the course of Employee's
employment with Company or of any corporation or other entity, at
least a majority of whose voting securities are owned, directly
or indirectly, by the Company (a "Subsidiary"), obtain or acquire
knowledge of Confidential Information, which knowledge would, in
the event Employee were to become employed by or associated with
a competitor of Company, or of any Subsidiary, become available
and provide invaluable benefits to such competitor and cause
irreparable harm to
<PAGE>
Company, or any Subsidiary, and in consideration of the severance
payments provided herein, Employee will not, within the
geographic location provided herein, from the date hereof until
twenty-four (24) months following termination of Employee's
employment for any reason, directly or indirectly, as a director,
officer, employee, or as an owner of any equity proprietary
interest in (except for ownership of shares in a publicly traded
company not exceeding five percent (5%) of any class of
outstanding equity securities), or as a consultant or otherwise,
render services to, have any financial interest in, or otherwise
participate in the affairs of, any business ("Competitive
Business") which is, or is planning or organizing to be, engaged
in the manufacture and/or sale of products or the rendering of
services competitive with the products manufactured or sold or
the services rendered by Company or any Subsidiary. The
geographic limitation of the foregoing covenant not to compete
shall extend to any state of the United States in which the
Company or any Subsidiary sold or actively attempted to sell its
products or services within the one (1) year period prior to the
termination of Employee's employment with Company. In the event
that Employee is employed by a Competitive Business which is
engaged in the manufacture or sale of multiple products, this
Section 2 shall apply to only those portions of said Competitive
Business which are directly or indirectly competitive with
Company or any Subsidiary.
b. From the date hereof until twenty-four (24) months following the
termination of Employee's employment, Employee will not, on
behalf of any Competitive Business, be connected in any way with
soliciting or hiring any employees of Company or any Subsidiary
who were subject to Employee's general supervision during
employment by Company, until such employees have not been
employed by Company or any Subsidiary for six (6) months.
c. In addition to all duties of loyalty imposed on Employee by law,
Employee shall maintain Confidential Information (as defined in
subsection (e) below) in strict confidence and secrecy and shall
not at any time after the date hereof, or at any time after
termination of, employment with Company, directly or indirectly,
use or disclose to others any Confidential Information, or use
any Confidential Information for the benefit of any person or
entity (including the Employee) other than Company, without the
prior written consent of Company (except for disclosures to
persons acting on Company's behalf with a need to know such
information provided such persons agree to hold such information
in confidence on terms acceptable to Company, and except for
disclosures that may be required by a court of competent
jurisdiction provided Employee notifies Company a reasonable time
prior to any such disclosure).
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<PAGE>
d. "Confidential Information" means Proprietary Ideas (as defined in
subsection (f) below) and other information (excluding
information that is generally known to the public by means other
than disclosure by Employee) related to Company's or any
Subsidiary's business, whether or not in written or printed form,
not generally known in the trade or industry, of which Employee
has become informed during his employment by Company or has or
will become informed during his employment by Company, including
without limitation, product specifications, service
specifications, manufacturing procedures, methods, equipment,
compositions, technology, designing, business plans, marketing
plans, formulae, trade secrets, know-how, research and
development programs, sales methods, customer lists, strategic
plans, mailing lists, sales levels and quantities, customer
usages and requirements, computer programs and other confidential
technical or business information and data.
e. "Proprietary Ideas" means ideas, suggestions, Inventions (as
defined in subsection (g) below) and work relating in any way to
the business and activities of Company, which are or may be
subjects of protection under applicable law concerning patents,
copyrights, trade secrets, trademarks, service marks or other
intellectual property rights.
f. "Inventions" means designs, discoveries, improvements, ideas,
conceptions, works of authorship, know how, innovations,
inventions, enhancements, modifications, methods, techniques,
technological developments and suggestions, whether or not
patentable, copyrightable or susceptible to any other form of
legal protection, including without limitation, products,
processes, machines, tooling, articles, compositions of matter,
promotional and advertising materials, data processing programs
and systems, manufacturing and sales techniques, artwork,
drawings, plans and specifications which either (i) relate to the
business of Company or any Subsidiary as conducted from time to
time, or (ii) relate to Company's or any Subsidiary's actual or
demonstrably anticipated research or development, or (iii) result
from any work performed by Employee for Company.
3. Specific Enforcement; Injunctive Relief. The parties acknowledge that
damages would be an inadequate remedy for any breach of the provisions
of Section 2 by Employee. Therefore, the obligations of Employee under
Section 2 shall be specifically enforceable and Employee agrees that
Bandag shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction, restraining
Employee from committing any violations of the provisions of Section 2
of this Agreement, and should such injunction or decree issue in favor
of Bandag, Bandag shall also be entitled to all costs, expenses, and
fees (including, without limitation, attorneys' fees) incurred
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<PAGE>
in connection with such action. Such remedies shall be cumulative and
not exclusive, and shall be in addition to any other remedy Bandag may
have.
4. Certain Remedies on Breach of Covenant Not to Compete and
Confidentiality. In addition to any other remedies available to
Company under applicable law for breach of any of the covenants and
obligations contained in Section 2 hereof, the breach by the Employee
of any of the covenants and obligations contained in Section 2 hereof
shall also result in:
a. the forfeit by the Employee of all options to purchase Class A
Common Stock to the extent unvested as of the date of the breach
and the cancellation of all such options to the extent vested but
not yet exercised by the Employee or his legal representatives as
of the date of breach; and
b. the forfeit by the Employee of all shares of restricted stock
granted by the Company to Employee on and after February 8, 1999
which are unvested as of the date of the breach.
5. Severance Payments. Bandag agrees that if Bandag involuntarily
terminates Employee's employment with Bandag or if Employee
voluntarily terminates his employment with Bandag for good reason as
defined in subparagraph b. below, it will pay Employee a severance
payment equal to the greater of (i) $1,000,000, or (ii) a gross amount
equal to two (2) years of Employee's base salary (subject to all
required federal, state and local payroll withholding). For purposes
of this paragraph "base salary" is defined as the higher of (i)
Employee's base salary on the date of his involuntary termination or
his voluntary termination for good reason or (ii) an "average" of
Employee's annual base salary computed by adding his annual base
salary on the date of such termination to his annual base salary on
December 31st for each of the two years immediately preceding such
termination and dividing the sum by three (3). Bandag will pay
Employee the discretionary severance amount in twenty-four (24) equal
monthly installments payments commencing thirty (30) days after the
date of Employee's involuntary termination, with monthly installment
payments made thereafter on the 1st day of each month for twenty-three
months. For purposes of this paragraph, the date of Employee's
involuntary termination or voluntary termination for good reason is
defined as the last date on which Employee renders services to Bandag.
a. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "involuntary termination" does not
include the termination of Employee's employment with Bandag due
to death, disability, retirement, quitting or any other type of
voluntary separation, by agreement or otherwise, from Bandag
(except for good reason as defined in subparagraph (b) below).
b. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "good reason" means only (i) a 15% or
greater
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<PAGE>
reduction in the Employee's highest base salary from and after
the date hereof, whether such reduction is made all at once or
cumulatively, or (ii) a materially adverse change, without the
Employee's prior written consent, in the nature or scope of the
Employee's title or responsibilities, or (iii) the relocation of
the Employee's principal place of employment to a location more
than fifty (50) miles from the Employee's principal place of
employment on the date hereof.
c. It is further understood and agreed to by the parties that in the
event Employee engages in any conduct in violation of, or
inconsistent with, his obligations under paragraph 2, in addition
to all other rights and remedies available to Bandag, Bandag's
obligation to make further severance payments under this
Agreement shall be immediately and forever discharged and
released and Employee shall be obligated to reimburse Bandag for
all severance payments theretofore made by Bandag.
d. As a condition precedent to Employee's entitlement to receive
severance payments and to Bandag's obligation to provide such
payments under this Agreement, Employee agrees that, in the event
of his involuntary termination or his voluntary termination for
"good reason," he will execute and be bound by the terms of a
general release of all claims against Bandag ("Release") arising
up to and including the date of his execution of the Release.
Employee understands and agrees that such Release will include,
at a minimum, a release of all claims against Bandag and its
affiliated companies and successors, and its and their officers,
directors, employees, and agents, arising under federal, state
and local anti-discrimination or civil rights laws, as well as
all claims, statutory or common-law, arising out of Employee's
employment with Bandag or its termination.
6. Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties pertaining to the subject matter
contained herein and supersedes all prior and contemporaneous
agreements, representations and understandings, whether written or
oral, as to the matters set forth herein, and Employee expressly
releases Bandag from any obligations under such previous agreements,
if any, including without limitation, any rights of Employee under any
previous employment agreement with Company, if any.
7. Modification and Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such a waiver, modification or
discharge is agreed to in writing signed by the parties hereto.
-5-
<PAGE>
8. No Other Agreements. No agreements, representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement.
9. Costs of Enforcement. In the event that a court of competent
jurisdiction determines that Employee has breached this Agreement,
Employee shall be liable to Bandag for all of its actual costs
(statutory and nonstatutory), expenses and attorneys' fees, incurred
to enforce this Agreement.
10. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Bandag, its successors and assigns, including the
purchaser of all or substantially all of the assets of Bandag, and
Employee and his heirs, executors, administrators and legal
representatives. Employee may not assign this Agreement, in whole or
in any part.
11. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Iowa applicable to contracts made and to be performed therein
between residents thereof.
12. 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 shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYEE BANDAG, INCORPORATED
/s/ Martin G. Carver By: /s/ Warren W. Heidbreder
- --------------------------------- ---------------------------------
Martin G. Carver Warren W. Heidbreder
Its: Vice President, Chief Financial
Officer and Secretary
-6-
EXHIBIT 10.2
BANDAG, INCORPORATED
SEVERANCE AGREEMENT FOR NATHANIEL L. DERBY II
THIS SEVERANCE AGREEMENT ("Agreement") is entered into as of the 4th
day of May, 1999, by and between Bandag, Inc. ("Bandag" or "Company"), an Iowa
corporation, and Nathaniel L. Derby II ("Employee").
RECITALS
WHEREAS, Employee is and has been an at-will executive employee of
Bandag, and possesses an extensive knowledge of the business and affairs of
Bandag, its proprietary information, trade secrets, policies, methods,
personnel, and problems;
WHEREAS, Employee desires to continue to be employed at-will by
Bandag, and acknowledges that this Agreement provides for severance payments to
which he is not otherwise entitled by any contract or any other legal
obligation;
WHEREAS, the parties agree and acknowledge that this Agreement is not
intended to constitute an employment contract; does not create any employment
rights other than those expressly set forth herein; does not alter or modify
Employee's status as an "at-will" employee of Bandag or the terms and conditions
of his employment except as expressly set forth herein, and does not create any
rights to continued employment or to termination only "for cause"; but rather,
is intended solely to provide for the availability of severance payments to
Employee under the terms and conditions set forth herein in consideration and
exchange for Employee's agreement to be bound by the Non-Competition and
Confidentiality provisions contained in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements of
the parties herein contained, the sufficiency of which is acknowledged by each
party, the parties hereto agree as follows:
1. Employee Covenants. Employee covenants and agrees to be bound by the
terms of the Non-Competition and Confidentiality provisions set forth
in paragraph 2, below.
2. Covenant Not to Compete and Confidentiality.
a. Recognizing that Employee will, during the course of Employee's
employment with Company or of any corporation or other entity, at
least a majority of whose voting securities are owned, directly
or indirectly, by the Company (a "Subsidiary"), obtain or acquire
knowledge of Confidential Information, which knowledge would, in
the event Employee were to become employed by or associated with
a competitor of Company, or of any Subsidiary, become available
and provide invaluable benefits to such competitor and cause
irreparable harm to
<PAGE>
Company, or any Subsidiary, and in consideration of the severance
payments provided herein, Employee will not, within the
geographic location provided herein, from the date hereof until
twenty-four (24) months following termination of Employee's
employment for any reason, directly or indirectly, as a director,
officer, employee, or as an owner of any equity proprietary
interest in (except for ownership of shares in a publicly traded
company not exceeding five percent (5%) of any class of
outstanding equity securities), or as a consultant or otherwise,
render services to, have any financial interest in, or otherwise
participate in the affairs of, any business ("Competitive
Business") which is, or is planning or organizing to be, engaged
in the manufacture and/or sale of products or the rendering of
services competitive with the products manufactured or sold or
the services rendered by Company or any Subsidiary. The
geographic limitation of the foregoing covenant not to compete
shall extend to any state of the United States in which the
Company or any Subsidiary sold or actively attempted to sell its
products or services within the one (1) year period prior to the
termination of Employee's employment with Company. In the event
that Employee is employed by a Competitive Business which is
engaged in the manufacture or sale of multiple products, this
Section 2 shall apply to only those portions of said Competitive
Business which are directly or indirectly competitive with
Company or any Subsidiary.
b. From the date hereof until twenty-four (24) months following the
termination of Employee's employment, Employee will not, on
behalf of any Competitive Business, be connected in any way with
soliciting or hiring any employees of Company or any Subsidiary
who were subject to Employee's general supervision during
employment by Company, until such employees have not been
employed by Company or any Subsidiary for six (6) months.
c. In addition to all duties of loyalty imposed on Employee by law,
Employee shall maintain Confidential Information (as defined in
subsection (e) below) in strict confidence and secrecy and shall
not at any time after the date hereof, or at any time after
termination of, employment with Company, directly or indirectly,
use or disclose to others any Confidential Information, or use
any Confidential Information for the benefit of any person or
entity (including the Employee) other than Company, without the
prior written consent of Company (except for disclosures to
persons acting on Company's behalf with a need to know such
information provided such persons agree to hold such information
in confidence on terms acceptable to Company, and except for
disclosures that may be required by a court of competent
jurisdiction provided Employee notifies Company a reasonable time
prior to any such disclosure).
-2-
<PAGE>
d. "Confidential Information" means Proprietary Ideas (as defined in
subsection (f) below) and other information (excluding
information that is generally known to the public by means other
than disclosure by Employee) related to Company's or any
Subsidiary's business, whether or not in written or printed form,
not generally known in the trade or industry, of which Employee
has become informed during his employment by Company or has or
will become informed during his employment by Company, including
without limitation, product specifications, service
specifications, manufacturing procedures, methods, equipment,
compositions, technology, designing, business plans, marketing
plans, formulae, trade secrets, know-how, research and
development programs, sales methods, customer lists, strategic
plans, mailing lists, sales levels and quantities, customer
usages and requirements, computer programs and other confidential
technical or business information and data.
e. "Proprietary Ideas" means ideas, suggestions, Inventions (as
defined in subsection (g) below) and work relating in any way to
the business and activities of Company, which are or may be
subjects of protection under applicable law concerning patents,
copyrights, trade secrets, trademarks, service marks or other
intellectual property rights.
f. "Inventions" means designs, discoveries, improvements, ideas,
conceptions, works of authorship, know how, innovations,
inventions, enhancements, modifications, methods, techniques,
technological developments and suggestions, whether or not
patentable, copyrightable or susceptible to any other form of
legal protection, including without limitation, products,
processes, machines, tooling, articles, compositions of matter,
promotional and advertising materials, data processing programs
and systems, manufacturing and sales techniques, artwork,
drawings, plans and specifications which either (i) relate to the
business of Company or any Subsidiary as conducted from time to
time, or (ii) relate to Company's or any Subsidiary's actual or
demonstrably anticipated research or development, or (iii) result
from any work performed by Employee for Company.
3. Specific Enforcement; Injunctive Relief. The parties acknowledge that
damages would be an inadequate remedy for any breach of the provisions
of Section 2 by Employee. Therefore, the obligations of Employee under
Section 2 shall be specifically enforceable and Employee agrees that
Bandag shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction, restraining
Employee from committing any violations of the provisions of Section 2
of this Agreement, and should such injunction or decree issue in favor
of Bandag, Bandag shall also be entitled to all costs, expenses, and
fees (including, without limitation, attorneys' fees) incurred
-3-
<PAGE>
in connection with such action. Such remedies shall be cumulative and
not exclusive, and shall be in addition to any other remedy Bandag may
have.
4. Certain Remedies on Breach of Covenant Not to Compete and
Confidentiality. In addition to any other remedies available to
Company under applicable law for breach of any of the covenants and
obligations contained in Section 2 hereof, the breach by the Employee
of any of the covenants and obligations contained in Section 2 hereof
shall also result in:
a. the forfeit by the Employee of all options to purchase Class A
Common Stock to the extent unvested as of the date of the breach
and the cancellation of all such options to the extent vested but
not yet exercised by the Employee or his legal representatives as
of the date of breach; and
b. the forfeit by the Employee of all shares of restricted stock
granted by the Company to Employee on and after February 8, 1999
which are unvested as of the date of the breach.
5. Severance Payments. Bandag agrees that if Bandag involuntarily
terminates Employee's employment with Bandag or if Employee
voluntarily terminates his employment with Bandag for good reason as
defined in subparagraph b. below, it will pay Employee a severance
payment equal to the greater of (i) $620,000, or (ii) a gross amount
equal to two (2) years of Employee's base salary (subject to all
required federal, state and local payroll withholding). For purposes
of this paragraph "base salary" is defined as the higher of (i)
Employee's base salary on the date of his involuntary termination or
his voluntary termination for good reason or (ii) an "average" of
Employee's annual base salary computed by adding his annual base
salary on the date of such termination to his annual base salary on
December 31st for each of the two years immediately preceding such
termination and dividing the sum by three (3). Bandag will pay
Employee the discretionary severance amount in twenty-four (24) equal
monthly installments payments commencing thirty (30) days after the
date of Employee's involuntary termination, with monthly installment
payments made thereafter on the 1st day of each month for twenty-three
months. For purposes of this paragraph, the date of Employee's
involuntary termination or voluntary termination for good reason is
defined as the last date on which Employee renders services to Bandag.
a. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "involuntary termination" does not
include the termination of Employee's employment with Bandag due
to death, disability, retirement, quitting or any other type of
voluntary separation, by agreement or otherwise, from Bandag
(except for good reason as defined in subparagraph (b) below).
b. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "good reason" means only (i) a 15% or
greater
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<PAGE>
reduction in the Employee's highest base salary from and after
the date hereof, whether such reduction is made all at once or
cumulatively, or (ii) a materially adverse change, without the
Employee's prior written consent, in the nature or scope of the
Employee's title or responsibilities, or (iii) the relocation of
the Employee's principal place of employment to a location more
than fifty (50) miles from the Employee's principal place of
employment on the date hereof.
c. It is further understood and agreed to by the parties that in the
event Employee engages in any conduct in violation of, or
inconsistent with, his obligations under paragraph 2, in addition
to all other rights and remedies available to Bandag, Bandag's
obligation to make further severance payments under this
Agreement shall be immediately and forever discharged and
released and Employee shall be obligated to reimburse Bandag for
all severance payments theretofore made by Bandag.
d. As a condition precedent to Employee's entitlement to receive
severance payments and to Bandag's obligation to provide such
payments under this Agreement, Employee agrees that, in the event
of his involuntary termination or his voluntary termination for
"good reason," he will execute and be bound by the terms of a
general release of all claims against Bandag ("Release") arising
up to and including the date of his execution of the Release.
Employee understands and agrees that such Release will include,
at a minimum, a release of all claims against Bandag and its
affiliated companies and successors, and its and their officers,
directors, employees, and agents, arising under federal, state
and local anti-discrimination or civil rights laws, as well as
all claims, statutory or common-law, arising out of Employee's
employment with Bandag or its termination.
6. Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties pertaining to the subject matter
contained herein and supersedes all prior and contemporaneous
agreements, representations and understandings, whether written or
oral, as to the matters set forth herein, and Employee expressly
releases Bandag from any obligations under such previous agreements,
if any, including without limitation, any rights of Employee under any
previous employment agreement with Company, if any.
7. Modification and Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such a waiver, modification or
discharge is agreed to in writing signed by the parties hereto.
-5-
<PAGE>
8. No Other Agreements. No agreements, representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement.
9. Costs of Enforcement. In the event that a court of competent
jurisdiction determines that Employee has breached this Agreement,
Employee shall be liable to Bandag for all of its actual costs
(statutory and nonstatutory), expenses and attorneys' fees, incurred
to enforce this Agreement.
10. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Bandag, its successors and assigns, including the
purchaser of all or substantially all of the assets of Bandag, and
Employee and his heirs, executors, administrators and legal
representatives. Employee may not assign this Agreement, in whole or
in any part.
11. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Iowa applicable to contracts made and to be performed therein
between residents thereof.
12. 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 shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYEE BANDAG, INCORPORATED
/s/ Nathaniel L. Derby II By: /s/ Martin G. Carver
- --------------------------------- ---------------------------------
Nathaniel L. Derby II Martin G. Carver
Its: Chairman of the Board, Chief
Executive Officer and President
-6-
EXHIBIT 10.3
BANDAG, INCORPORATED
SEVERANCE AGREEMENT FOR SAM FERRISE II
THIS SEVERANCE AGREEMENT ("Agreement") is entered into as of the 4th
day of May, 1999, by and between Bandag, Inc. ("Bandag" or "Company"), an Iowa
corporation, and Sam Ferrise II ("Employee").
RECITALS
WHEREAS, Employee is and has been an at-will executive employee of
Bandag, and possesses an extensive knowledge of the business and affairs of
Bandag, its proprietary information, trade secrets, policies, methods,
personnel, and problems;
WHEREAS, Employee desires to continue to be employed at-will by
Bandag, and acknowledges that this Agreement provides for severance payments to
which he is not otherwise entitled by any contract or any other legal
obligation;
WHEREAS, the parties agree and acknowledge that this Agreement is not
intended to constitute an employment contract; does not create any employment
rights other than those expressly set forth herein; does not alter or modify
Employee's status as an "at-will" employee of Bandag or the terms and conditions
of his employment except as expressly set forth herein, and does not create any
rights to continued employment or to termination only "for cause"; but rather,
is intended solely to provide for the availability of severance payments to
Employee under the terms and conditions set forth herein in consideration and
exchange for Employee's agreement to be bound by the Non-Competition and
Confidentiality provisions contained in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements of
the parties herein contained, the sufficiency of which is acknowledged by each
party, the parties hereto agree as follows:
1. Employee Covenants. Employee covenants and agrees to be bound by the
terms of the Non-Competition and Confidentiality provisions set forth
in paragraph 2, below.
2. Covenant Not to Compete and Confidentiality.
a. Recognizing that Employee will, during the course of Employee's
employment with Company or of any corporation or other entity, at
least a majority of whose voting securities are owned, directly
or indirectly, by the Company (a "Subsidiary"), obtain or acquire
knowledge of Confidential Information, which knowledge would, in
the event Employee were to become employed by or associated with
a competitor of Company, or of any Subsidiary, become available
and provide invaluable benefits to such competitor and cause
irreparable harm to
<PAGE>
Company, or any Subsidiary, and in consideration of the severance
payments provided herein, Employee will not, within the
geographic location provided herein, from the date hereof until
twenty-four (24) months following termination of Employee's
employment for any reason, directly or indirectly, as a director,
officer, employee, or as an owner of any equity proprietary
interest in (except for ownership of shares in a publicly traded
company not exceeding five percent (5%) of any class of
outstanding equity securities), or as a consultant or otherwise,
render services to, have any financial interest in, or otherwise
participate in the affairs of, any business ("Competitive
Business") which is, or is planning or organizing to be, engaged
in the manufacture and/or sale of products or the rendering of
services competitive with the products manufactured or sold or
the services rendered by Company or any Subsidiary. The
geographic limitation of the foregoing covenant not to compete
shall extend to any state of the United States in which the
Company or any Subsidiary sold or actively attempted to sell its
products or services within the one (1) year period prior to the
termination of Employee's employment with Company. In the event
that Employee is employed by a Competitive Business which is
engaged in the manufacture or sale of multiple products, this
Section 2 shall apply to only those portions of said Competitive
Business which are directly or indirectly competitive with
Company or any Subsidiary.
b. From the date hereof until twenty-four (24) months following the
termination of Employee's employment, Employee will not, on
behalf of any Competitive Business, be connected in any way with
soliciting or hiring any employees of Company or any Subsidiary
who were subject to Employee's general supervision during
employment by Company, until such employees have not been
employed by Company or any Subsidiary for six (6) months.
c. In addition to all duties of loyalty imposed on Employee by law,
Employee shall maintain Confidential Information (as defined in
subsection (e) below) in strict confidence and secrecy and shall
not at any time after the date hereof, or at any time after
termination of, employment with Company, directly or indirectly,
use or disclose to others any Confidential Information, or use
any Confidential Information for the benefit of any person or
entity (including the Employee) other than Company, without the
prior written consent of Company (except for disclosures to
persons acting on Company's behalf with a need to know such
information provided such persons agree to hold such information
in confidence on terms acceptable to Company, and except for
disclosures that may be required by a court of competent
jurisdiction provided Employee notifies Company a reasonable time
prior to any such disclosure).
-2-
<PAGE>
d. "Confidential Information" means Proprietary Ideas (as defined in
subsection (f) below) and other information (excluding
information that is generally known to the public by means other
than disclosure by Employee) related to Company's or any
Subsidiary's business, whether or not in written or printed form,
not generally known in the trade or industry, of which Employee
has become informed during his employment by Company or has or
will become informed during his employment by Company, including
without limitation, product specifications, service
specifications, manufacturing procedures, methods, equipment,
compositions, technology, designing, business plans, marketing
plans, formulae, trade secrets, know-how, research and
development programs, sales methods, customer lists, strategic
plans, mailing lists, sales levels and quantities, customer
usages and requirements, computer programs and other confidential
technical or business information and data.
e. "Proprietary Ideas" means ideas, suggestions, Inventions (as
defined in subsection (g) below) and work relating in any way to
the business and activities of Company, which are or may be
subjects of protection under applicable law concerning patents,
copyrights, trade secrets, trademarks, service marks or other
intellectual property rights.
f. "Inventions" means designs, discoveries, improvements, ideas,
conceptions, works of authorship, know how, innovations,
inventions, enhancements, modifications, methods, techniques,
technological developments and suggestions, whether or not
patentable, copyrightable or susceptible to any other form of
legal protection, including without limitation, products,
processes, machines, tooling, articles, compositions of matter,
promotional and advertising materials, data processing programs
and systems, manufacturing and sales techniques, artwork,
drawings, plans and specifications which either (i) relate to the
business of Company or any Subsidiary as conducted from time to
time, or (ii) relate to Company's or any Subsidiary's actual or
demonstrably anticipated research or development, or (iii) result
from any work performed by Employee for Company.
3. Specific Enforcement; Injunctive Relief. The parties acknowledge that
damages would be an inadequate remedy for any breach of the provisions
of Section 2 by Employee. Therefore, the obligations of Employee under
Section 2 shall be specifically enforceable and Employee agrees that
Bandag shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction, restraining
Employee from committing any violations of the provisions of Section 2
of this Agreement, and should such injunction or decree issue in favor
of Bandag, Bandag shall also be entitled to all costs, expenses, and
fees (including, without limitation, attorneys' fees) incurred
-3-
<PAGE>
in connection with such action. Such remedies shall be cumulative and
not exclusive, and shall be in addition to any other remedy Bandag may
have.
4. Certain Remedies on Breach of Covenant Not to Compete and
Confidentiality. In addition to any other remedies available to
Company under applicable law for breach of any of the covenants and
obligations contained in Section 2 hereof, the breach by the Employee
of any of the covenants and obligations contained in Section 2 hereof
shall also result in:
a. the forfeit by the Employee of all options to purchase Class A
Common Stock to the extent unvested as of the date of the breach
and the cancellation of all such options to the extent vested but
not yet exercised by the Employee or his legal representatives as
of the date of breach; and
b. the forfeit by the Employee of all shares of restricted stock
granted by the Company to Employee on and after February 8, 1999
which are unvested as of the date of the breach.
5. Severance Payments. Bandag agrees that if Bandag involuntarily
terminates Employee's employment with Bandag or if Employee
voluntarily terminates his employment with Bandag for good reason as
defined in subparagraph b. below, it will pay Employee a severance
payment equal to the greater of (i) $680,000, or (ii) a gross amount
equal to two (2) years of Employee's base salary (subject to all
required federal, state and local payroll withholding). For purposes
of this paragraph "base salary" is defined as the higher of (i)
Employee's base salary on the date of his involuntary termination or
his voluntary termination for good reason or (ii) an "average" of
Employee's annual base salary computed by adding his annual base
salary on the date of such termination to his annual base salary on
December 31st for each of the two years immediately preceding such
termination and dividing the sum by three (3). Bandag will pay
Employee the discretionary severance amount in twenty-four (24) equal
monthly installments payments commencing thirty (30) days after the
date of Employee's involuntary termination, with monthly installment
payments made thereafter on the 1st day of each month for twenty-three
months. For purposes of this paragraph, the date of Employee's
involuntary termination or voluntary termination for good reason is
defined as the last date on which Employee renders services to Bandag.
a. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "involuntary termination" does not
include the termination of Employee's employment with Bandag due
to death, disability, retirement, quitting or any other type of
voluntary separation, by agreement or otherwise, from Bandag
(except for good reason as defined in subparagraph (b) below).
b. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "good reason" means only (i) a 15% or
greater
-4-
<PAGE>
reduction in the Employee's highest base salary from and after
the date hereof, whether such reduction is made all at once or
cumulatively, or (ii) a materially adverse change, without the
Employee's prior written consent, in the nature or scope of the
Employee's title or responsibilities, or (iii) the relocation of
the Employee's principal place of employment to a location more
than fifty (50) miles from the Employee's principal place of
employment on the date hereof.
c. It is further understood and agreed to by the parties that in the
event Employee engages in any conduct in violation of, or
inconsistent with, his obligations under paragraph 2, in addition
to all other rights and remedies available to Bandag, Bandag's
obligation to make further severance payments under this
Agreement shall be immediately and forever discharged and
released and Employee shall be obligated to reimburse Bandag for
all severance payments theretofore made by Bandag.
d. As a condition precedent to Employee's entitlement to receive
severance payments and to Bandag's obligation to provide such
payments under this Agreement, Employee agrees that, in the event
of his involuntary termination or his voluntary termination for
"good reason," he will execute and be bound by the terms of a
general release of all claims against Bandag ("Release") arising
up to and including the date of his execution of the Release.
Employee understands and agrees that such Release will include,
at a minimum, a release of all claims against Bandag and its
affiliated companies and successors, and its and their officers,
directors, employees, and agents, arising under federal, state
and local anti-discrimination or civil rights laws, as well as
all claims, statutory or common-law, arising out of Employee's
employment with Bandag or its termination.
6. Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties pertaining to the subject matter
contained herein and supersedes all prior and contemporaneous
agreements, representations and understandings, whether written or
oral, as to the matters set forth herein, and Employee expressly
releases Bandag from any obligations under such previous agreements,
if any, including without limitation, any rights of Employee under any
previous employment agreement with Company, if any.
7. Modification and Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such a waiver, modification or
discharge is agreed to in writing signed by the parties hereto.
-5-
<PAGE>
8. No Other Agreements. No agreements, representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement.
9. Costs of Enforcement. In the event that a court of competent
jurisdiction determines that Employee has breached this Agreement,
Employee shall be liable to Bandag for all of its actual costs
(statutory and nonstatutory), expenses and attorneys' fees, incurred
to enforce this Agreement.
10. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Bandag, its successors and assigns, including the
purchaser of all or substantially all of the assets of Bandag, and
Employee and his heirs, executors, administrators and legal
representatives. Employee may not assign this Agreement, in whole or
in any part.
11. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Iowa applicable to contracts made and to be performed therein
between residents thereof.
12. 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 shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYEE BANDAG, INCORPORATED
/s/ Sam Ferrise II By: /s/ Martin G. Carver
- --------------------------------- ---------------------------------
Sam Ferrise II Martin G. Carver
Its: Chairman of the Board, Chief
Executive Officer and President
-6-
EXHIBIT 10.4
BANDAG, INCORPORATED
SEVERANCE AGREEMENT FOR WARREN W. HEIDBREDER
THIS SEVERANCE AGREEMENT ("Agreement") is entered into as of the 4th
day of May, 1999, by and between Bandag, Inc. ("Bandag" or "Company"), an Iowa
corporation, and Warren W. Heidbreder ("Employee").
RECITALS
WHEREAS, Employee is and has been an at-will executive employee of
Bandag, and possesses an extensive knowledge of the business and affairs of
Bandag, its proprietary information, trade secrets, policies, methods,
personnel, and problems;
WHEREAS, Employee desires to continue to be employed at-will by
Bandag, and acknowledges that this Agreement provides for severance payments to
which he is not otherwise entitled by any contract or any other legal
obligation;
WHEREAS, the parties agree and acknowledge that this Agreement is not
intended to constitute an employment contract; does not create any employment
rights other than those expressly set forth herein; does not alter or modify
Employee's status as an "at-will" employee of Bandag or the terms and conditions
of his employment except as expressly set forth herein, and does not create any
rights to continued employment or to termination only "for cause"; but rather,
is intended solely to provide for the availability of severance payments to
Employee under the terms and conditions set forth herein in consideration and
exchange for Employee's agreement to be bound by the Non-Competition and
Confidentiality provisions contained in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements of
the parties herein contained, the sufficiency of which is acknowledged by each
party, the parties hereto agree as follows:
1. Employee Covenants. Employee covenants and agrees to be bound by the
terms of the Non-Competition and Confidentiality provisions set forth
in paragraph 2, below.
2. Covenant Not to Compete and Confidentiality.
a. Recognizing that Employee will, during the course of Employee's
employment with Company or of any corporation or other entity, at
least a majority of whose voting securities are owned, directly
or indirectly, by the Company (a "Subsidiary"), obtain or acquire
knowledge of Confidential Information, which knowledge would, in
the event Employee were to become employed by or associated with
a competitor of Company, or of any Subsidiary, become available
and provide invaluable benefits to such competitor and cause
irreparable harm to
<PAGE>
Company, or any Subsidiary, and in consideration of the severance
payments provided herein, Employee will not, within the
geographic location provided herein, from the date hereof until
twenty-four (24) months following termination of Employee's
employment for any reason, directly or indirectly, as a director,
officer, employee, or as an owner of any equity proprietary
interest in (except for ownership of shares in a publicly traded
company not exceeding five percent (5%) of any class of
outstanding equity securities), or as a consultant or otherwise,
render services to, have any financial interest in, or otherwise
participate in the affairs of, any business ("Competitive
Business") which is, or is planning or organizing to be, engaged
in the manufacture and/or sale of products or the rendering of
services competitive with the products manufactured or sold or
the services rendered by Company or any Subsidiary. The
geographic limitation of the foregoing covenant not to compete
shall extend to any state of the United States in which the
Company or any Subsidiary sold or actively attempted to sell its
products or services within the one (1) year period prior to the
termination of Employee's employment with Company. In the event
that Employee is employed by a Competitive Business which is
engaged in the manufacture or sale of multiple products, this
Section 2 shall apply to only those portions of said Competitive
Business which are directly or indirectly competitive with
Company or any Subsidiary.
b. From the date hereof until twenty-four (24) months following the
termination of Employee's employment, Employee will not, on
behalf of any Competitive Business, be connected in any way with
soliciting or hiring any employees of Company or any Subsidiary
who were subject to Employee's general supervision during
employment by Company, until such employees have not been
employed by Company or any Subsidiary for six (6) months.
c. In addition to all duties of loyalty imposed on Employee by law,
Employee shall maintain Confidential Information (as defined in
subsection (e) below) in strict confidence and secrecy and shall
not at any time after the date hereof, or at any time after
termination of, employment with Company, directly or indirectly,
use or disclose to others any Confidential Information, or use
any Confidential Information for the benefit of any person or
entity (including the Employee) other than Company, without the
prior written consent of Company (except for disclosures to
persons acting on Company's behalf with a need to know such
information provided such persons agree to hold such information
in confidence on terms acceptable to Company, and except for
disclosures that may be required by a court of competent
jurisdiction provided Employee notifies Company a reasonable time
prior to any such disclosure).
-2-
<PAGE>
d. "Confidential Information" means Proprietary Ideas (as defined in
subsection (f) below) and other information (excluding
information that is generally known to the public by means other
than disclosure by Employee) related to Company's or any
Subsidiary's business, whether or not in written or printed form,
not generally known in the trade or industry, of which Employee
has become informed during his employment by Company or has or
will become informed during his employment by Company, including
without limitation, product specifications, service
specifications, manufacturing procedures, methods, equipment,
compositions, technology, designing, business plans, marketing
plans, formulae, trade secrets, know-how, research and
development programs, sales methods, customer lists, strategic
plans, mailing lists, sales levels and quantities, customer
usages and requirements, computer programs and other confidential
technical or business information and data.
e. "Proprietary Ideas" means ideas, suggestions, Inventions (as
defined in subsection (g) below) and work relating in any way to
the business and activities of Company, which are or may be
subjects of protection under applicable law concerning patents,
copyrights, trade secrets, trademarks, service marks or other
intellectual property rights.
f. "Inventions" means designs, discoveries, improvements, ideas,
conceptions, works of authorship, know how, innovations,
inventions, enhancements, modifications, methods, techniques,
technological developments and suggestions, whether or not
patentable, copyrightable or susceptible to any other form of
legal protection, including without limitation, products,
processes, machines, tooling, articles, compositions of matter,
promotional and advertising materials, data processing programs
and systems, manufacturing and sales techniques, artwork,
drawings, plans and specifications which either (i) relate to the
business of Company or any Subsidiary as conducted from time to
time, or (ii) relate to Company's or any Subsidiary's actual or
demonstrably anticipated research or development, or (iii) result
from any work performed by Employee for Company.
3. Specific Enforcement; Injunctive Relief. The parties acknowledge that
damages would be an inadequate remedy for any breach of the provisions
of Section 2 by Employee. Therefore, the obligations of Employee under
Section 2 shall be specifically enforceable and Employee agrees that
Bandag shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction, restraining
Employee from committing any violations of the provisions of Section 2
of this Agreement, and should such injunction or decree issue in favor
of Bandag, Bandag shall also be entitled to all costs, expenses, and
fees (including, without limitation, attorneys' fees) incurred
-3-
<PAGE>
in connection with such action. Such remedies shall be cumulative and
not exclusive, and shall be in addition to any other remedy Bandag may
have.
4. Certain Remedies on Breach of Covenant Not to Compete and
Confidentiality. In addition to any other remedies available to
Company under applicable law for breach of any of the covenants and
obligations contained in Section 2 hereof, the breach by the Employee
of any of the covenants and obligations contained in Section 2 hereof
shall also result in:
a. the forfeit by the Employee of all options to purchase Class A
Common Stock to the extent unvested as of the date of the breach
and the cancellation of all such options to the extent vested but
not yet exercised by the Employee or his legal representatives as
of the date of breach; and
b. the forfeit by the Employee of all shares of restricted stock
granted by the Company to Employee on and after February 8, 1999
which are unvested as of the date of the breach.
5. Severance Payments. Bandag agrees that if Bandag involuntarily
terminates Employee's employment with Bandag or if Employee
voluntarily terminates his employment with Bandag for good reason as
defined in subparagraph b. below, it will pay Employee a severance
payment equal to the greater of (i) $650,000, or (ii) a gross amount
equal to two (2) years of Employee's base salary (subject to all
required federal, state and local payroll withholding). For purposes
of this paragraph "base salary" is defined as the higher of (i)
Employee's base salary on the date of his involuntary termination or
his voluntary termination for good reason or (ii) an "average" of
Employee's annual base salary computed by adding his annual base
salary on the date of such termination to his annual base salary on
December 31st for each of the two years immediately preceding such
termination and dividing the sum by three (3). Bandag will pay
Employee the discretionary severance amount in twenty-four (24) equal
monthly installments payments commencing thirty (30) days after the
date of Employee's involuntary termination, with monthly installment
payments made thereafter on the 1st day of each month for twenty-three
months. For purposes of this paragraph, the date of Employee's
involuntary termination or voluntary termination for good reason is
defined as the last date on which Employee renders services to Bandag.
a. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "involuntary termination" does not
include the termination of Employee's employment with Bandag due
to death, disability, retirement, quitting or any other type of
voluntary separation, by agreement or otherwise, from Bandag
(except for good reason as defined in subparagraph (b) below).
b. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "good reason" means only (i) a 15% or
greater
-4-
<PAGE>
reduction in the Employee's highest base salary from and after
the date hereof, whether such reduction is made all at once or
cumulatively, or (ii) a materially adverse change, without the
Employee's prior written consent, in the nature or scope of the
Employee's title or responsibilities, or (iii) the relocation of
the Employee's principal place of employment to a location more
than fifty (50) miles from the Employee's principal place of
employment on the date hereof.
c. It is further understood and agreed to by the parties that in the
event Employee engages in any conduct in violation of, or
inconsistent with, his obligations under paragraph 2, in addition
to all other rights and remedies available to Bandag, Bandag's
obligation to make further severance payments under this
Agreement shall be immediately and forever discharged and
released and Employee shall be obligated to reimburse Bandag for
all severance payments theretofore made by Bandag.
d. As a condition precedent to Employee's entitlement to receive
severance payments and to Bandag's obligation to provide such
payments under this Agreement, Employee agrees that, in the event
of his involuntary termination or his voluntary termination for
"good reason," he will execute and be bound by the terms of a
general release of all claims against Bandag ("Release") arising
up to and including the date of his execution of the Release.
Employee understands and agrees that such Release will include,
at a minimum, a release of all claims against Bandag and its
affiliated companies and successors, and its and their officers,
directors, employees, and agents, arising under federal, state
and local anti-discrimination or civil rights laws, as well as
all claims, statutory or common-law, arising out of Employee's
employment with Bandag or its termination.
6. Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties pertaining to the subject matter
contained herein and supersedes all prior and contemporaneous
agreements, representations and understandings, whether written or
oral, as to the matters set forth herein, and Employee expressly
releases Bandag from any obligations under such previous agreements,
if any, including without limitation, any rights of Employee under any
previous employment agreement with Company, if any.
7. Modification and Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such a waiver, modification or
discharge is agreed to in writing signed by the parties hereto.
-5-
<PAGE>
8. No Other Agreements. No agreements, representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement.
9. Costs of Enforcement. In the event that a court of competent
jurisdiction determines that Employee has breached this Agreement,
Employee shall be liable to Bandag for all of its actual costs
(statutory and nonstatutory), expenses and attorneys' fees, incurred
to enforce this Agreement.
10. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Bandag, its successors and assigns, including the
purchaser of all or substantially all of the assets of Bandag, and
Employee and his heirs, executors, administrators and legal
representatives. Employee may not assign this Agreement, in whole or
in any part.
11. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Iowa applicable to contracts made and to be performed therein
between residents thereof.
12. 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 shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYEE BANDAG, INCORPORATED
/s/ Warren W. Heidbreder By: /s/ Martin G. Carver
- --------------------------------- ---------------------------------
Warren W. Heidbreder Martin G. Carver
Its: Chairman of the Board, Chief
Executive Officer and President
-6-
EXHIBIT 10.5
BANDAG, INCORPORATED
SEVERANCE AGREEMENT FOR JOHN C. MC ERLANE
THIS SEVERANCE AGREEMENT ("Agreement") is entered into as of the 4th
day of May, 1999, by and between Bandag, Inc. ("Bandag" or "Company"), an Iowa
corporation, and John C. McErlane ("Employee").
RECITALS
WHEREAS, Employee is and has been an at-will executive employee of
Bandag, and possesses an extensive knowledge of the business and affairs of
Bandag, its proprietary information, trade secrets, policies, methods,
personnel, and problems;
WHEREAS, Employee desires to continue to be employed at-will by
Bandag, and acknowledges that this Agreement provides for severance payments to
which he is not otherwise entitled by any contract or any other legal
obligation;
WHEREAS, the parties agree and acknowledge that this Agreement is not
intended to constitute an employment contract; does not create any employment
rights other than those expressly set forth herein; does not alter or modify
Employee's status as an "at-will" employee of Bandag or the terms and conditions
of his employment except as expressly set forth herein, and does not create any
rights to continued employment or to termination only "for cause"; but rather,
is intended solely to provide for the availability of severance payments to
Employee under the terms and conditions set forth herein in consideration and
exchange for Employee's agreement to be bound by the Non-Competition and
Confidentiality provisions contained in this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements of
the parties herein contained, the sufficiency of which is acknowledged by each
party, the parties hereto agree as follows:
1. Employee Covenants. Employee covenants and agrees to be bound by the
terms of the Non-Competition and Confidentiality provisions set forth
in paragraph 2, below.
2. Covenant Not to Compete and Confidentiality.
a. Recognizing that Employee will, during the course of Employee's
employment with Company or of any corporation or other entity, at
least a majority of whose voting securities are owned, directly
or indirectly, by the Company (a "Subsidiary"), obtain or acquire
knowledge of Confidential Information, which knowledge would, in
the event Employee were to become employed by or associated with
a competitor of Company, or of any Subsidiary, become available
and provide invaluable benefits to such competitor and cause
irreparable harm to
<PAGE>
Company, or any Subsidiary, and in consideration of the severance
payments provided herein, Employee will not, within the
geographic location provided herein, from the date hereof until
twenty-four (24) months following termination of Employee's
employment for any reason, directly or indirectly, as a director,
officer, employee, or as an owner of any equity proprietary
interest in (except for ownership of shares in a publicly traded
company not exceeding five percent (5%) of any class of
outstanding equity securities), or as a consultant or otherwise,
render services to, have any financial interest in, or otherwise
participate in the affairs of, any business ("Competitive
Business") which is, or is planning or organizing to be, engaged
in the manufacture and/or sale of products or the rendering of
services competitive with the products manufactured or sold or
the services rendered by Company or any Subsidiary. The
geographic limitation of the foregoing covenant not to compete
shall extend to any state of the United States in which the
Company or any Subsidiary sold or actively attempted to sell its
products or services within the one (1) year period prior to the
termination of Employee's employment with Company. In the event
that Employee is employed by a Competitive Business which is
engaged in the manufacture or sale of multiple products, this
Section 2 shall apply to only those portions of said Competitive
Business which are directly or indirectly competitive with
Company or any Subsidiary.
b. From the date hereof until twenty-four (24) months following the
termination of Employee's employment, Employee will not, on
behalf of any Competitive Business, be connected in any way with
soliciting or hiring any employees of Company or any Subsidiary
who were subject to Employee's general supervision during
employment by Company, until such employees have not been
employed by Company or any Subsidiary for six (6) months.
c. In addition to all duties of loyalty imposed on Employee by law,
Employee shall maintain Confidential Information (as defined in
subsection (e) below) in strict confidence and secrecy and shall
not at any time after the date hereof, or at any time after
termination of, employment with Company, directly or indirectly,
use or disclose to others any Confidential Information, or use
any Confidential Information for the benefit of any person or
entity (including the Employee) other than Company, without the
prior written consent of Company (except for disclosures to
persons acting on Company's behalf with a need to know such
information provided such persons agree to hold such information
in confidence on terms acceptable to Company, and except for
disclosures that may be required by a court of competent
jurisdiction provided Employee notifies Company a reasonable time
prior to any such disclosure).
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<PAGE>
d. "Confidential Information" means Proprietary Ideas (as defined in
subsection (f) below) and other information (excluding
information that is generally known to the public by means other
than disclosure by Employee) related to Company's or any
Subsidiary's business, whether or not in written or printed form,
not generally known in the trade or industry, of which Employee
has become informed during his employment by Company or has or
will become informed during his employment by Company, including
without limitation, product specifications, service
specifications, manufacturing procedures, methods, equipment,
compositions, technology, designing, business plans, marketing
plans, formulae, trade secrets, know-how, research and
development programs, sales methods, customer lists, strategic
plans, mailing lists, sales levels and quantities, customer
usages and requirements, computer programs and other confidential
technical or business information and data.
e. "Proprietary Ideas" means ideas, suggestions, Inventions (as
defined in subsection (g) below) and work relating in any way to
the business and activities of Company, which are or may be
subjects of protection under applicable law concerning patents,
copyrights, trade secrets, trademarks, service marks or other
intellectual property rights.
f. "Inventions" means designs, discoveries, improvements, ideas,
conceptions, works of authorship, know how, innovations,
inventions, enhancements, modifications, methods, techniques,
technological developments and suggestions, whether or not
patentable, copyrightable or susceptible to any other form of
legal protection, including without limitation, products,
processes, machines, tooling, articles, compositions of matter,
promotional and advertising materials, data processing programs
and systems, manufacturing and sales techniques, artwork,
drawings, plans and specifications which either (i) relate to the
business of Company or any Subsidiary as conducted from time to
time, or (ii) relate to Company's or any Subsidiary's actual or
demonstrably anticipated research or development, or (iii) result
from any work performed by Employee for Company.
3. Specific Enforcement; Injunctive Relief. The parties acknowledge that
damages would be an inadequate remedy for any breach of the provisions
of Section 2 by Employee. Therefore, the obligations of Employee under
Section 2 shall be specifically enforceable and Employee agrees that
Bandag shall be entitled to an injunction, restraining order or other
equitable relief from any court of competent jurisdiction, restraining
Employee from committing any violations of the provisions of Section 2
of this Agreement, and should such injunction or decree issue in favor
of Bandag, Bandag shall also be entitled to all costs, expenses, and
fees (including, without limitation, attorneys' fees) incurred
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<PAGE>
in connection with such action. Such remedies shall be cumulative and
not exclusive, and shall be in addition to any other remedy Bandag may
have.
4. Certain Remedies on Breach of Covenant Not to Compete and
Confidentiality. In addition to any other remedies available to
Company under applicable law for breach of any of the covenants and
obligations contained in Section 2 hereof, the breach by the Employee
of any of the covenants and obligations contained in Section 2 hereof
shall also result in:
a. the forfeit by the Employee of all options to purchase Class A
Common Stock to the extent unvested as of the date of the breach
and the cancellation of all such options to the extent vested but
not yet exercised by the Employee or his legal representatives as
of the date of breach; and
b. the forfeit by the Employee of all shares of restricted stock
granted by the Company to Employee on and after February 8, 1999
which are unvested as of the date of the breach.
5. Severance Payments. Bandag agrees that if Bandag involuntarily
terminates Employee's employment with Bandag or if Employee
voluntarily terminates his employment with Bandag for good reason as
defined in subparagraph b. below, it will pay Employee a severance
payment equal to the greater of (i) $610,000, or (ii) a gross amount
equal to two (2) years of Employee's base salary (subject to all
required federal, state and local payroll withholding). For purposes
of this paragraph "base salary" is defined as the higher of (i)
Employee's base salary on the date of his involuntary termination or
his voluntary termination for good reason or (ii) an "average" of
Employee's annual base salary computed by adding his annual base
salary on the date of such termination to his annual base salary on
December 31st for each of the two years immediately preceding such
termination and dividing the sum by three (3). Bandag will pay
Employee the discretionary severance amount in twenty-four (24) equal
monthly installments payments commencing thirty (30) days after the
date of Employee's involuntary termination, with monthly installment
payments made thereafter on the 1st day of each month for twenty-three
months. For purposes of this paragraph, the date of Employee's
involuntary termination or voluntary termination for good reason is
defined as the last date on which Employee renders services to Bandag.
a. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "involuntary termination" does not
include the termination of Employee's employment with Bandag due
to death, disability, retirement, quitting or any other type of
voluntary separation, by agreement or otherwise, from Bandag
(except for good reason as defined in subparagraph (b) below).
b. It is understood and agreed to by the parties that, as used in
this paragraph 5, the term "good reason" means only (i) a 15% or
greater
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<PAGE>
reduction in the Employee's highest base salary from and after
the date hereof, whether such reduction is made all at once or
cumulatively, or (ii) a materially adverse change, without the
Employee's prior written consent, in the nature or scope of the
Employee's title or responsibilities, or (iii) the relocation of
the Employee's principal place of employment to a location more
than fifty (50) miles from the Employee's principal place of
employment on the date hereof.
c. It is further understood and agreed to by the parties that in the
event Employee engages in any conduct in violation of, or
inconsistent with, his obligations under paragraph 2, in addition
to all other rights and remedies available to Bandag, Bandag's
obligation to make further severance payments under this
Agreement shall be immediately and forever discharged and
released and Employee shall be obligated to reimburse Bandag for
all severance payments theretofore made by Bandag.
d. As a condition precedent to Employee's entitlement to receive
severance payments and to Bandag's obligation to provide such
payments under this Agreement, Employee agrees that, in the event
of his involuntary termination or his voluntary termination for
"good reason," he will execute and be bound by the terms of a
general release of all claims against Bandag ("Release") arising
up to and including the date of his execution of the Release.
Employee understands and agrees that such Release will include,
at a minimum, a release of all claims against Bandag and its
affiliated companies and successors, and its and their officers,
directors, employees, and agents, arising under federal, state
and local anti-discrimination or civil rights laws, as well as
all claims, statutory or common-law, arising out of Employee's
employment with Bandag or its termination.
6. Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties pertaining to the subject matter
contained herein and supersedes all prior and contemporaneous
agreements, representations and understandings, whether written or
oral, as to the matters set forth herein, and Employee expressly
releases Bandag from any obligations under such previous agreements,
if any, including without limitation, any rights of Employee under any
previous employment agreement with Company, if any.
7. Modification and Waiver. No provisions of this Agreement may be
modified, waived or discharged unless such a waiver, modification or
discharge is agreed to in writing signed by the parties hereto.
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<PAGE>
8. No Other Agreements. No agreements, representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in this Agreement.
9. Costs of Enforcement. In the event that a court of competent
jurisdiction determines that Employee has breached this Agreement,
Employee shall be liable to Bandag for all of its actual costs
(statutory and nonstatutory), expenses and attorneys' fees, incurred
to enforce this Agreement.
10. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of Bandag, its successors and assigns, including the
purchaser of all or substantially all of the assets of Bandag, and
Employee and his heirs, executors, administrators and legal
representatives. Employee may not assign this Agreement, in whole or
in any part.
11. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Iowa applicable to contracts made and to be performed therein
between residents thereof.
12. 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 shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
EMPLOYEE BANDAG, INCORPORATED
/s/ John C. McErlane By: Martin G. Carver
- --------------------------------- ---------------------------------
John C. McErlane Martin G. Carver
Its: Chairman of the Board, Chief
Executive Officer and President
-6-
Exhibit 10.6
Bandag, Incorporated
Stock Award Plan
Article 1. Establishment, Objectives, and Duration
1.1 Establishment of the Plan. Bandag, Incorporated, an Iowa corporation
(hereinafter referred to as the "Company"), hereby establishes a compensation
award plan to be known as the "Bandag, Incorporated Stock Award Plan"
(hereinafter referred to as the "Plan"), as set forth in this document. The Plan
permits the grant of Nonqualified Stock Options, Incentive Stock Options, and
Restricted Stock.
Subject to approval by the Company's shareholders, the Plan shall become
effective as of February 8, 1999 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.
1.2 Objectives of the Plan. The objectives of the Plan are to 1) create a
better link between the interests of the Participants and the Company's
shareholders; 2) promote teamwork and provide Participants with rewards for
excellence in the Company's performance; 3) provide flexibility to the Company
in its ability to compensate, attract, and retain the services of individuals
who make significant contributions to the Company's success; and 4) allow
Participants to further share in the success of the Company.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 13 hereof, until all shares subject to it shall have been
purchased or acquired according to the Plan's provisions.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "Award" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, or Restricted
Stock.
2.2 "Award Agreement" means an agreement entered into by the Company and a
Participant setting forth the terms and provisions applicable to
Awards granted to the Participant under this Plan.
2.3 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.4 "Change in Control" of the Company shall be deemed to have occurred as
of the first day that any one or more of the following conditions
shall have been satisfied:
(a) A sale, exchange, transfer, or other disposition of any ownership
interest in the Company which results in the "Carver Family" as
defined in Section 4.(f).(iv) of the Restated Articles of
Incorporation of the Company, owning, in the aggregate, directly
or indirectly, less than 51% voting control of the Company;
provided that the conversion of Class B Common Stock into Common
Stock pursuant to Section 4.(f) of Article IV of the Company's
Restated Articles of Incorporation
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shall not be deemed to be a "sale, exchange, transfer or other
disposition" for purposes of this Section 2.4.
(b) The approval of the Company's shareholders of a sale, exchange,
transfer, or other disposition of all, or substantially all, of
the assets of the Company; or
(c) The approval of the Company's shareholders of a merger or
consolidation of the Company with or into any other corporation
under circumstances where the shareholders of the Company
immediately prior to such merger or consolidation, will own,
directly or indirectly, after such merger or consolidation,
securities representing less than 51% voting control of the
corporation surviving any such merger or consolidation.
2.5 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.6 "Committee" means any committee appointed by the Board to administer
the Plan, as specified in Article 3 herein, except for any Awards to
Directors which shall only be granted by the Board. Any such committee
shall be comprised entirely of Directors.
2.7 "Company" means Bandag, Incorporated, an Iowa corporation, including
any and all Subsidiaries, and any successor thereto as provided in
Article 16 herein.
2.8 "Director" means any individual who is a member of the Board of
Directors of the Company and who is not an employee of the Company or
any Subsidiary.
2.9 "Disability" shall have the meaning ascribed to such term in the
Company's or Subsidiary's long-term disability plan governing a
Participant or, if no such plan exists, at the discretion of the
Board.
2.10 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.11 "Employee" means any employee of the Company or a Subsidiary.
2.12 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.13 "Fair Market Value" of a Share shall be determined on the basis of the
average of the opening and closing sale prices on the principal
securities exchange or market on which the Shares are traded or, if no
such sale prices are available on the relevant date, then on the last
previous day on which a sale was reported. If the above methods are
otherwise inapplicable, then the Fair Market Value of the Shares shall
be determined in good faith by the Board.
2.14 "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive
Stock Option and which is intended to meet the requirements of Code
Section 422.
2.15 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to
meet the requirements of Code Section 422.
2
<PAGE>
2.16 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.17 "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.18 "Participant" means an Employee or Director who has been selected to
receive an Award or who has outstanding an Award granted under the
Plan.
2.19 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.20 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Board, at its
discretion), and the Shares are subject to a substantial risk of
forfeiture, as provided in Article 7 herein.
2.21 "Restricted Stock" means an Award granted to a Participant pursuant to
Article 7 herein.
2.22 "Retirement" means the Participant's termination of employment (other
than due to death or Disability) on or after age 60 with ten or more
years of service for vesting purposes as determined under any
qualified retirement plan of the Company or any Subsidiary covering
the Participant.
2.23 "Shares" means the shares of Class A Common Stock of the Company.
2.24 "Subsidiary" means any company during any period in which it is a
"subsidiary corporation" (as that term is defined in Code Section
424(f)) with respect to the Company.
Article 3. Administration
3.1 General. The Plan shall be administered by the Board, or (subject to
the following) by any Committee appointed by the Board. The members of the
Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors. The Board may delegate to the Committee
any or all of the administration of the Plan; provided, however, that the
administration of the Plan with respect to Awards granted to Directors may not
be so delegated. To the extent that the Board has delegated to the Committee any
authority and responsibility under the Plan, all applicable references to the
Board in the Plan shall be to the Committee.
3.2 Authority of the Board. Except as limited by law or by the Restated
Articles of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Board shall have full power to select Employees and
Directors who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent with
the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, or waive rules and regulations
for the Plan's administration; and (subject to the provisions of Article 13
herein) amend the terms and conditions of any outstanding Award as provided in
the Plan. Further, the Board shall make all other determinations which may be
necessary or advisable for the administration of the Plan. As permitted by law
(and subject to Section 3.1 herein), the Board may delegate its authority as
identified herein.
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3.3 Decisions Binding. All determinations and decisions made by the Board
pursuant to the provisions of the Plan and all related orders and resolutions of
the Board shall be final, conclusive and binding on all persons, including the
Company, its stockholders, Directors, Employees, Participants, and their estates
and beneficiaries.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be nine hundred thousand
(900,000), no more than three hundred thousand (300,000) of which may be granted
in the form of Restricted Stock. The Shares may be authorized, but unissued, or
reacquired Shares. The Board shall determine the appropriate methodology for
calculating the number of shares issued pursuant to the Plan. If any Shares
covered by an Award are forfeited or if any Award otherwise terminates, expires
or is cancelled prior to the delivery of all the Shares, then the number of
Shares counted against the number of Shares available under the Plan in
connection with the grant of such Award, to the extent of any such forfeiture,
termination, expiration or cancellation, shall again be available for granting
of additional Awards under the Plan. Unless and until the Board determines that
an Award shall not be designed to comply with the Performance-Based Exception,
the following rules shall apply to grants of such Awards under the Plan:
(a) Stock Options: The maximum aggregate number of Shares that may be
granted in the form of Stock Options pursuant to any Award granted in
any one fiscal year to any one single Participant shall be ninety
thousand (90,000).
(b) Restricted Stock: The maximum aggregate grant with respect to Awards
of Restricted Stock granted in any one fiscal year to any one single
Participant shall be thirty thousand (30,000).
4.2 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under
Section 4.1, in the number and class and/or price of Shares subject to
outstanding Awards granted under the Plan, and in the Award limits set forth in
subsections 4.1(a) and 4.1(b), as may be determined to be appropriate and
equitable by the Board, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in this Plan shall be all
Employees and Directors.
5.2 Actual Participation. Subject to the provisions of the Plan, the Board
may, from time to time, select from all Employees and Directors, those to whom
Awards shall be granted and shall determine the nature and amount of each Award.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Board.
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6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Board shall determine. The Award Agreement also shall specify whether the Option
is intended to be an ISO within the meaning of Code Section 422, or an NQSO
whose grant is intended not to fall under the provisions of Code Section 422.
6.3 Option Price. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option granted to a Participant shall expire
at such time as the Board shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board shall in each instance approve, which need not be the same for each
grant or for each Participant.
6.6 Payment. Options granted under this Article 6 shall be exercised by the
delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares, except that, in the case of a
cashless exercise as described below, payment shall be made as soon as
practicable after exercise.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired shares of Class A Common Stock and/or Common Stock of the
Company having an aggregate Fair Market Value at the time of exercise equal to
the total Option Price (provided that the shares of stock of the Company which
are tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price), or (c) by a combination of
(a) and (b).
The Board also may allow cashless exercises as permitted under the Federal
Reserve Board's Regulation T, subject to applicable securities law restrictions,
or by any other means which the Board determines to be consistent with the
Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company
shall deliver to the Participant Share certificates in an appropriate amount
based upon the number of Shares purchased under the Option(s).
6.7 Restrictions on Share Transferability. The Board may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws applicable
to such Shares.
6.8 Termination of Employment/Directorship. Each Participant's Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment or directorship with the Company. Such provisions shall be determined
in the sole discretion of the Board, shall be included in the Award Agreement
entered
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into with each Participant, need not be uniform among all Options issued
pursuant to this Article 6, and may reflect distinctions based on the reasons
for termination.
6.9 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the Plan
shall be exercisable during his or her lifetime by only such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6 may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant's
Award Agreement, all NQSOs granted to a Participant under this Article 6
shall be exercisable during his or her lifetime by only such Participant,
or the Participant's legal representative.
Article 7. Restricted Stock
7.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Board, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Board shall determine.
7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Board shall determine.
7.3 Transferability. Except as provided in this Article 7, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Board and specified in the Restricted Stock Award
Agreement, or upon earlier satisfaction of any other conditions, as specified by
the Board in its sole discretion and set forth in the Restricted Stock Award
Agreement. All rights with respect to the Restricted Stock granted to a
Participant under the Plan shall be available during his or her lifetime to only
such Participant.
7.4 Other Restrictions. Subject to Article 8 herein, the Board shall impose
such other conditions and/or restrictions on any Shares of Restricted Stock
granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (Company-wide, divisional, etc.), time-based
restrictions on vesting following the attainment of the performance goals,
and/or restrictions under applicable federal or state securities laws. In
addition, the Board may condition the grant of Shares of Restricted Stock upon
the achievement of one or more of the performance measures set forth in Article
8.
The Company may retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 7, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
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7.5 Voting Rights. To the extent applicable, Participants holding Shares of
Restricted Stock granted hereunder may be granted the right to exercise full
voting rights with respect to those Shares during the Period of Restriction.
7.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
entitled to receive regular cash dividends paid with respect to the underlying
Shares while they are so held. The Board may apply any restrictions to the
dividends that the Board deems appropriate. Without limiting the generality of
the preceding sentence, if the grant or vesting of Restricted Shares is designed
to comply with the requirements of the Performance-Based Exception, the Board
may apply any restrictions it deems appropriate to the payment of dividends
declared with respect to such Restricted Shares, such that the dividends and/or
the Restricted Shares maintain eligibility for the Performance-Based Exception.
The Board may also approve payments by the Company to Participants in cash
or its equivalent, amounts of which the Board deems appropriate to be sufficient
remuneration for all or a portion of the resulting income tax consequences to
the Participant of the Restricted Shares. The conditions under which such
payments, if any, shall be made shall be set forth in the Participant's Award
Agreement.
7.7 Termination of Employment/Directorship. Each Restricted Stock Award
Agreement shall set forth the extent to which the Participant shall have the
right to receive unvested Restricted Shares following termination of the
Participant's employment or directorship with the Company. Such provisions shall
be determined in the sole discretion of the Board, shall be included in the
Award Agreement entered into with each Participant, need not be uniform among
all Shares of Restricted Stock issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination; provided, however, that
except in the cases of terminations connected with a Change in Control and
terminations by reason of death or Disability, the vesting of Shares of
Restricted Stock which qualify for the Performance-Based Exception shall occur
at the time they otherwise would have, but for the termination.
Article 8. Performance Measures
Unless and until the Board proposes for shareholder vote and shareholders
approve a change in the general performance measures set forth in this Article
8, the attainment of which may determine the degree of payout and/or vesting
with respect to Awards which are designed to qualify for the Performance-Based
Exception, the performance measure(s) to be used for purposes of such grants
shall be chosen from among:
(a) Earnings per diluted share;
(b) Net income (before or after taxes);
(c) Return measures (including, but not limited to, return on assets,
equity, or sales);
(d) Cash flow return on investments which equals net cash flows divided by
owners equity;
(e) Earnings before or after taxes;
(f) Gross revenues;
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(g) Share price (including, but no limited to, growth measures and total
shareholder return); and
(h) Economic profit (generally defined as, but not limited to, after-tax
operating profit less the cost of capital).
The Board shall have the discretion to adjust the amount of the Award
depending upon the degree of attainment of the preestablished performance goals;
provided, however, that no discretion may be exercised with respect to Awards
which are designed to qualify for the Performance-Based Exception (other than
discretion by the Board to decrease the amount of the Award otherwise payable
upon attainment of the preestablished performance goals).
In the event that applicable tax laws change to permit Board discretion to
alter the governing performance measures without obtaining shareholder approval
of such changes, the Board shall have sole discretion to make such changes
without obtaining shareholder approval. In addition, in the event that the Board
determines that it is advisable to grant Awards which shall not qualify for the
Performance-Based Exception, the Board may make such grants without satisfying
the requirements of Code Section 162(m).
Article 9. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
Article 10. Deferrals
The Board may permit or require a Participant to defer such Participant's
receipt of the delivery of Shares that would otherwise be due to such
Participant by virtue of the exercise of an Option or the lapse or waiver of
restrictions with respect to Restricted Stock. If any such deferral election is
required or permitted, the Board shall, in its sole discretion, establish rules
and procedures for such payment deferrals.
Article 11. Rights of Employees/Directors
11.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company.
11.2 Participation. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
Article 12. Change in Control
12.1 Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
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(a) Any and all Options granted hereunder shall become immediately
exercisable, and shall remain exercisable throughout their entire
term;
(b) Any restriction periods and restrictions imposed on Restricted
Stock which are not performance-based shall lapse;
12.2 Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan (but subject to the
limitations of Section 12.3 hereof) or any Award Agreement provision, the
provisions of this Article 12 may not be terminated, amended, or modified on or
after the date of a Change in Control to affect adversely any Award theretofore
granted under the Plan without the prior written consent of the Participant with
respect to said Participant's outstanding Awards; provided, however, the Board
may terminate, amend, or modify this Article 12 at any time and from time to
time prior to the date of a Change in Control.
12.3 Pooling of Interests Accounting. Notwithstanding any other provision
of the Plan to the contrary, in the event that the consummation of a Change in
Control is contingent on using pooling of interests accounting methodology, the
Board may take any action necessary to preserve the use of pooling of interests
accounting, including, but not limited to, unilateral amendment of existing
Award Agreements.
Article 13. Amendment, Modification, and Termination
13.1 Amendment, Modification, and Termination. Subject to the terms of the
Plan, the Board may at any time and from time to time, alter, amend, suspend or
terminate the Plan in whole or in part.
13.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Board may make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Board determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided, that unless the Board determines
otherwise at the time such adjustment is considered, no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.
13.3 Awards Previously Granted. Notwithstanding any other provision of the
Plan to the contrary (but subject to Section 12.3 hereof), no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant holding such Award.
13.4 Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Board determines that such compliance is not desired with respect to any Award
or Awards available for grant under the Plan, then compliance with Code Section
162(m) will not be required. In addition, in the event that changes are made to
Code Section 162(m) to permit greater flexibility with respect to any Award or
Awards available under the Plan, the Board may, subject to this Article 13, make
any adjustments it deems appropriate.
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Article 14. Withholding
14.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.
14.2 Share Withholding. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon
any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Board, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date the tax is to be determined equal
to the minimum statutory total tax which could be imposed on the transaction.
All such elections shall be irrevocable, made in writing, signed by the
Participant, and shall be subject to any restrictions or limitations that the
Board, in its sole discretion, deems appropriate.
Article 15. Indemnification
Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgement in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
Article 16. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase of
all or substantially all of the business and/or assets of the Company, or the
result of a merger, consolidation or otherwise.
Article 17. Legal Construction
17.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
17.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
17.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
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17.4 Governing Law. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the state of Iowa.
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