5.1 ERMUSR 06-14-2022UTILITIES COMMISSION MEETING
TO:FROM:
ERMU Commission Melissa Karpinski –Finance Manager
MEETING DATE: AGENDA ITEM NUMBER:
June 14, 2022 5.1
SUBJECT:
Financial Report – April 2022
ACTION REQUESTED:
Receive the April 2022Financial Report
DISCUSSION:
Please note that these are the preliminary unaudited financial statements.
Electric
April’selectric kWh sales are upfrom the prior year, 3%. For further breakdown:
Residential usageis up10%
Small Commercialusageis up12%
Large Commercial usage is down 2%
Electric Operating Revenues for April of $3,300,652 are more than prior year by 13% and
favorable tobudget by 9%. AprilYTD ismore than prior year by 7% and favorable to budget by
4%. The prior YTD variance and budget YTD variance is mainly due tothe accrual of the PCA
under Other Electric Sales – Rate Increase.
Other Revenues of $236,148 are more than the prior year by 28% and favorable to budget by
16%. Other Revenues YTD is less than the prior year by 11% and is unfavorable to budget by
17%. The main driver of prior YTD variance and budget YTD variance is Interest & Dividend
Income.
Overall, Total Revenues of $3,536,801 are more than the prior year by 14% and favorable to
budget by 10%. YTD is more than the prior year by 6% and favorable to budget by 2%.
Purchased Power of $2,101,422 is more than the prior year by 13% and is unfavorable to
budget by 8%. YTD is more than prior year by 17% and is unfavorable to budget by 17%. YTD
EAC charge is $1,037,388 more than prior year and $1,156,841 more than budget. EAC charge is
partially offset by PCA revenue.
ministrative Expenses of $295,539are more thanthe prior year by 2% but in line with
Ad
budget. YTD costs are more than the prior year by 3% but are favorable to budgetby 4%.
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General Expenses of $21,468areless than prior yearby 25% andarefavorable to budget by
56%. YTD costs are lessthan the prior year by 7% and are favorable to budget by 48%.
Total expensesYTDare 13% more than prior year andare unfavorable to budgetby 9%. The
main driver causing the prior YTD variance and budget YTD variance is Purchased Power.
For April 2022, the Electric Department has a Net Profit of $383,392 and YTD Net Lossof
($240,929). This is ahead of the budgeted monthly Net Profit of $211,583 and is better than
prior year monthly Net Profit of $249,376. YTD is behind the budgeted YTD Net Profit of
$508,361 and is less than the prior YTD Net Profit of $448,409.
Water
April gallons of water sold are down 3% from the prior year. For further breakdown:
Residential use is down 2%
Commercial use is down 5%
Water Operating Revenues for April of $147,781 are ahead of prior year by 3% and are
favorable to budget by 8%. YTD is ahead of prior year by 1% and is favorable to budget by 6%.
Other Revenues of $479,851 are ahead of prior year by 353% and favorable to budget by 543%.
YTD is ahead of prior YTD by 119% and favorable to budget by 132%. The main driver causing
the prior YTD variance and budget YTD variance is ConnectionFees.
Overall, Total Revenues of $627,632 are morethan prior year by 151% and ahead of prior YTD
by 45%. YTD Total Revenues are favorable to budgetby 53%.
Total Expenses of $239,948are lessthanprior yearby 26% andlessthan theprior YTDby 5%.
YTD is favorable to budget by 4%.
For April 2022, the Water Department has a Net Profit of $387,683 and YTD Net Profit of
$194,426. This is ahead of the budgeted monthly Net Loss of ($38,309) and ahead of the prior
year monthly Net Loss of ($74,020). YTD is ahead of the budgeted YTD Net Loss of ($274,281)
and is ahead of the prior YTD Net Loss of ($236,293).
ATTACHMENTS:
Balance Sheet 04.2022
Electric Balance Sheet 04.2022
Water Balance Sheet 04.2022
Summary Electric Statement of Revenues, Expenses and Changes in Net Position
04.2022
Summary Water Statement of Revenues, Expenses and Changes in Net Position 04.2022
Graphs Prior Year and YTD 2022
Detailed Electric Statement of Revenues, Expenses and Changes in Net Position 04.2022
Detailed Water Statement of Revenues, Expenses and Changes in Net Position 04.2022
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119
120
121
122
123
Elk River Municipal Utilities Monthly Electrical Demand
80.0
75.0
70.0
65.0
60.0
55.0
Demand in MW 50.0
45.0
40.0
35.0
Month
20212022
Elk River Municipal Utilities Monthly Energy Purchases
40,000
35,000
30,000
25,000
20,000
Energy Purchases in MWH
15,000
Month
20212022
124
Elk River Municipal Utilities Monthly Total Electric Load
40,000
35,000
30,000
25,000
Electric Load in MWH
20,000
15,000
Month
20212022
Elk River Municipal Utilities Monthly Electric Sales
$4,500,000
$4,000,000
$3,500,000
$3,000,000
$2,500,000
Sales in Dollars
$2,000,000
$1,500,000
$1,000,000
Month
20212022
125
Elk River Municipal Utilities Monthly Residential, Commercial & Industrial
Loads
25,000
20,000
15,000
10,000
Loads in MWH
5,000
-
Month
2021 Residential2022 Residential2021 Commercial
2022 Commercial2021 Industrial2022 Industrial
Elk River Municipal Utilities Monthly Residential, Commercial & Industrial
Sales
$2,500,000
$2,000,000
$1,500,000
$1,000,000
Sales in Dollars
$500,000
$0
Month
2021 Residential2022 Residential2021 Commercial
2022 Commercial2021 Industrial2022 Industrial
126
Elk River Municipal Utilities Monthly Water Pumpage
180.0
160.0
140.0
120.0
100.0
80.0
60.0
Pumpage in Million Gal.
40.0
20.0
0.0
Month
20212022
Elk River Municipal Utilities Peak Day Pumpage
7.0
6.0
5.0
4.0
illion Gal.
3.0
2.0
Peak Day in M
1.0
0.0
Month
20212022
127
Elk River Municipal Utilities Monthly Water Sales
180$600,000
160
$500,000
140
120$400,000
100
$300,000
80
Sales In Dollars
60$200,000
Sales in Million Gal.
40
$100,000
20
0$0
Month
2021 MG2022 MG2021 $2022 $
128
129
130
131
132
133
134
135
136
137
138
UTILITIES COMMISSION MEETING
TO:FROM:
ERMU Commission Chris Kerzman –Engineering Manager
MEETING DATE: AGENDA ITEM NUMBER:
June 14, 2022 5.2
SUBJECT:
Field Services Facility Expansion Project Update
ACTION REQUESTED:
None
DISCUSSION:
Over the past month, framing on the second floor has been installed, and rough-in work has
been moving along well. Window installation on the north elevation of the building has been
going very smoothly. With windows and rough-ins finishing up, drywall and painting/finish work
will be starting soon. The chassis wash equipment has been installed in the wash bay, and the
crane equipment has been installed in the repair bay. Through most of the south areas of the
building, contractors are finalizing control systems and detail work. The garage door jambs have
been repaired, and garage doors are staged at the shop ready for installation.
Upcoming work for the next month is expected to include installation of garage doors,
continued work on the second level, and focus on the detail through the south portion of the
building; the inventory area, wash bay, and repair bay all need HVAC, lighting, and fire system
details finished. The garage area has some repair work needed, as well as control work. First
level workshops and lunchroom are drywalled, and finish work is beginning.
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UTILITIES COMMISSION MEETING
TO:FROM:
ERMU Commission ERMU General Manager Search Committee
MEETING DATE: AGENDA ITEM NUMBER:
June 14, 2022 5.3
SUBJECT:
General Manager Search Committee Update
ACTION REQUESTED:
Approve the ERMU General Manager Employment Agreement
BACKGROUND/DISCUSSION:
The Search Committee made an offer to Mark Hanson on June 2, 2022, for the position of
General Manager, which was accepted on June 8. Due to personal and professional
circumstances there will be no formal press release until June 20. Mark will start as Deputy
General Manager on Monday, July 18, working collaboratively with Theresa Slominski until her
retirement at the end of the year, at which point Mark will assume the full role of General
Manager. The employment agreement is presented here for the Commission to review and
approve.
ATTACHMENTS:
ERMU General Manager Employment Agreement
______________________________________________________________________________
Page 1 of 1
140
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”), for an employment start date of July
18, 2022 (the “Start Date”), is entered into between Elk River Municipal Utilities, a Minnesota
corporation (the “Utilities”) and Mark Hanson, a resident of Minnesota (“Employee”).
RECITALS
A. The Utilities desires to employ Employee in accordance with the terms of this Agreement.
B. The Utilities and Employee desire to enter into this Agreement.
AGREEMENT
In consideration of the above recitals and the promises set forth in this Agreement, the Utilities
and Employee agree as follows:
1. Nature and Capacity of Employment. The Utilities hereby agrees to employ Employee
pursuant to the terms of this Agreement. As of the Start Date and through December 31, 2022,
Employee’s title will be Deputy General Manager and he will report directly to the Utilities’s
General Manager. Beginning January 1, 2023, Employee’s title will be General Manager and he
will report directly to the Utilities Commission. Employee agrees to perform, or be available to
perform, on a full-time basis, the functions of these positions and such other duties as assigned by
the Utilities consistent with such positions. Employee’s employment is subject to the Utilities’s
policies and practices except as otherwise explicitly provided in this Agreement; and to the
continuing discretion of the Utilities Commission.
2. At-Will Employment. Employee’s employment with the Utilities will commence as of
the Start Date and continue until terminated by either party as provided for in Section 6 below.
Employee understands that Employee’s employment with the Utilities is at will and may be
terminated by either the Employee or the Utilities for any reason at any time, with or without
advance notice, subject to the provisions of Section 6, below. Under certain circumstances
Employee may be eligible for severance benefits pursuant to Section 6.
3. Compensation.
3.1. Base Salary. As of the Effective Date, Employee’s annualized gross base salary
will be One Hundred Seventy-Four Thousand Dollars ($174,000), which will be earned by
Employee on a pro rata basis as Employee performs services for the Utilities and which salary will
be paid in accordance with the Utilities’s regular payroll practices. Employee’s compensation is
subject to review and change by the Utilities in its sole discretion from time to time. Employee’s
compensation shall be subject to federal and state income tax withholding, FICA and Medicare
and such other deductions as the Utilities is required by law, or believes in good faith it is required
by law, to make. The position of General Manager is an exempt executive position under the Fair
Labor Standards Act (FLSA) and the Minnesota Fair Labor Standards Act (MFLSA) and, in
accordance with those laws, shall not be subject to the payment of premium compensation, or to
receiving compensatory time, for overtime.
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3.2.Performance Measurement Incentive Compensation.Employee will be eligible
to fully participate in the Utilities’s Performance Metrics Incentive Compensation system
(“UPMIC”) used to annually award performance-based compensation earned by eligible
employees (those currently employed who are in good standing) in accordance with the terms and
conditions and incentive achievement formulae adopted annually by the Utilities Commission and
set forth in a UPMIC document. To be eligible to receive an award under UPMIC if one is
achieved, the Employee must remain employed by the Utilities at the time such award is to be
made.
4. Employee Benefits. During Employee’s employment with the Utilities, Employee will be
entitled to participate in all retirement savings plans, health and other insurance plans, and other
employee benefits and policies made available by the Utilities to its employees generally, as they
may be changed from time to time.
Retirement Plan. Such retirement plans include, specifically, the plan sponsored and
managed by or on behalf of the Minnesota Public Employees Retirement Association (PERA). The Utilities
shall make contributions to a retirement plan account established for Employee in PERA as
prescribed by law and in accordance with the terms and conditions of such PERA retirement plan.
Vacation. For purposes of the Utilities’s vacation benefit applicable to Employee,
Employee will be credited on his Start Date with nineteen years of industry service, resulting in
his being eligible under the Utilities’s vacation policy to accrue 25 vacation days per year at the
rate of 7.70 hours per pay period during the first year of his employment, and to use his vacation
time without reduction of the minimum annual base salary payable to Employee pursuant to
Section 3.1 of this Agreement. In addition, on his Start Date Employee will receive five vacation
days in his account, which will be immediately available for use and which are in addition to the
25 days he will be eligible to accrue during his first year of employment. Except as provided
herein, all terms and conditions for Employee’s paid vacation including terms for annual carryover
of vacation time and for pay out or conversion of such time upon the end of employment will be
as applicable to all Utilities employees under the Utilities’s vacation policy.
Paid Sick Leave and Paid Holidays. Paid sick leave and paid holidays are included as other benefits
and policies made available by the Utilities to its employees generally. Under Utilities policy Employee
will be eligible to accrue sick leave at the rate of 3.70 hours per pay period (twelve days per year).
In addition, on his Start Date Employee will receive ten sick days in his account, which will be
immediately available for use and which are in addition to the twelve (12) sick days he will be
eligible to accrue during his first year of employment. Employee may use his accrued sick leave
in accordance with Utilities policy without reduction in salary. Except as provided herein, all
terms and conditions for Employee’s sick leave including terms for annual carryover of sick leave
time and for any pay out or conversion of such time upon the end of employment will be as
applicable to all Utilities employees under the Utilities’s sick leave policies.
Employee will be entitled to observe Utilities-designated holidays in accordance with
Utilities policy without reduction in his salary.
No Obligation to Establish Other Benefit Plans. Employee acknowledges and agrees
that the Utilities is under no obligation to Employee to establish and maintain any employee benefit
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plan in which Employee may participate, and that the terms and provisions of any employee benefit
plan of the Utilities are matters within the exclusive province of the Utilities Commission, subject
to applicable law. Upon the termination of Employee’s employment, Employee will be entitled to
continue those benefits as to which continuation is required by state or federal law.
Utilities Vehicleand Fuel. Based on the expectation that Employee will regularly be
available to respond in a timely and appropriate manner to calls about Utilities business outside of
regular business hours, Employee will be provided an assigned and marked Utilities vehicle for
his use, which shall be subject to this Agreement, the Utilities’s Use and Disposal of Utility
Property policy, and all other applicable Utilities policies. Employee will be provided with tokens
or other means by which he may purchase fuel for the Utilitiesvehicle within the city of Elk River,
and a Utilities credit card with which he may purchase fuel for the Utilities vehicle when outside
the city of Elk River. Employee is required to track and regularly report to the Utilities the mileage
for his personal use of the company vehicle, for tax and accounting purposes, which the Utilities
will treat as a taxable benefit to him.
Professional and Civic Dues, Fees, and Expenses. The Utilities shall pay for Employee’s
reasonable professional dues, fees, and expenses for membership in and attendance at professional
and civic organizations and events and conferences reasonably related to Employee’s position with
the Utilities; but the Utilities reserves the right to require that the Utilities Commission approve
such dues, fees, and expenses in advance of their being incurred.
5. Confidential Information.
5.1. Definition of Confidential Information. For purposes hereof, “Confidential
Information” means any non-public information regarding the Utilities or any affiliated entity,
including but not limited to the City of Elk River (each, an “Affiliate”), or any of their employees,
directors, representatives, suppliers, vendors, shareholders, members, customers, or other third
parties or entities with whom the Utilities or any Affiliate does business which the Employee learns
or develops during Employee’s application for and/or employment with the Utilities, whether
developed by Employee or by others and in whatever form, and includes, but is not limited to,
trade secrets, Inventions (as defined below), financial information, key personnel information, and
information relating to such matters as existing or contemplated products, services, research and/or
development, insurance arrangements, profit margins, fee schedules, pricing, design, processes,
formulae, business plans, sales techniques, marketing techniques, training methods, manuals and
materials, policies or practices related to business, or other matters, computer databases, computer
programs, software and other technology, customer lists, customer preferences or requirements,
vendor lists, or supply information. Any information disclosed to the Employee or to which the
Employee has access during the time of Employee’s application for and/or employment with the
Utilities that Employee reasonably considers to be Confidential Information, or which the Utilities
or any Affiliate treats as Confidential Information, will be presumed Confidential Information.
5.2. Restrictions. Employee agrees not to, directly or indirectly, use or disclose any
Confidential Information for the benefit of anyone other than the Utilities either during Employee’s
employment with the Utilities or after Employee’s employment with the Utilities ends, regardless
of the reason for such separation of employment. Employee recognizes that the Confidential
Information constitutes a valuable asset of the Utilities and hereby agrees to act in such a manner
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as to prevent its disclosure and use by any person unless such use is for the benefit of the Utilities
and in the proper course of Employee’s duties with the Utilities. Employee’s obligations under
this paragraph are unconditional and will not be excused by any conduct on the part of the Utilities,
except prior voluntary disclosure by the Utilities of the information, other than by Employee.
5.3.Compelled Disclosure. In the event a third party seeks to compel disclosure of
Confidential Information by Employee by judicial or administrative process, Employee will
promptly notify the Utilities Commission Chair of such occurrence and furnish a copy of the
demand, summons, subpoena, or other process served upon Employee to compel such disclosure
and will permit the Utilities to assume, at its expense, but with Employee’s cooperation, defense
of such disclosure demand. In the event that the Utilitiesrefuses to contest such third party
disclosure demand under judicial or administrative process, or if a final judicial order is issued
compelling disclosure of Confidential Information by Employee, Employee will be entitled to
disclose such information in compliance with the terms of such administrative or judicial process
or order without violating Employee’s obligations under this Agreement.
5.4. Immunity for Certain Limited Disclosures. Notwithstanding any other provision
of this Agreement, Employee may in accordance with any applicable law, including but not limited
to the federal Defend Trade Secrets Act, disclose Utilities information, including trade secrets (a)
in confidence, to federal, state, or local government officials, or to an attorney of Employee, for
the sole purpose of reporting or investigating a suspected violation of law; or (b) in a document
filed in a lawsuit or other legal proceeding, but only if the filing is made under seal and protected
from public disclosure. Nothing in this Agreement is intended to conflict with any applicable law
or create liability for disclosures expressly allowed by law.
5.5. Return of Confidential Information and Other Property. When Employee’s
employment with the Utilities ends, regardless of the reason for such separation of employment,
Employee will promptly turn over to Utilities in good condition all property of the Utilities or any
Affiliate in Employee’s possession or control, including, but not limited to, all originals, copies of
or electronically stored documents or other materials containing Confidential Information,
regardless of who prepared them. In the case of electronically stored information retained by
Employee outside of Utilities’s electronic systems, Employee will promptly make a hard copy of
such information in paper, audio recording, disc format, or other format as appropriate, turn that
hard copy over to Utilities, and then destroy Employee’s electronically stored information.
Further, Employee agrees to execute written confirmation that all Confidential Information in the
Employee’s possession, or to which the Employee has access, has been turned over to Utilities or
destroyed.
6. Termination of Employment Agreement. Employee’s employment may be terminated
at will subject to the provisions of this Section 6.
6.1.With Cause. For purposes of this Agreement, “Cause” will mean the occurrence
of any of the following, as determined by the Utilities Commission in its sole discretion:
(a) Employee’s failure to satisfactorily perform Employee’s
duties, provided that such Cause is not cured by Employee, or is not
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capable of being cured by Employee, within 90 days after the
Utilities delivers written notice of such Cause to Employee; or
(b) Conduct in violation of or inconsistent with Utilities policy,
including but not limited to any and all policies set forth in this
Handbook; conduct or language that is improper or inappropriate in
the discretion of the Utilities; insubordination; failure to do the work
assigned in a manner satisfactory to the Utilities; dishonesty or
stealing; the sale, transfer of, or possession, or being under the
influence, of intoxicating beverages or controlled or mood altering
substances while on the job; or
(c) Conduct by Employee which is (or will be if continued) injurious to
the Utilities, monetarily or otherwise; or
(d) Fraud, misappropriation, or embezzlement by the Employee; or
(e) Employee’s conviction of a felony crime, gross misdemeanor, or a
crime of moral turpitude; or
(f)Employee’s material breach of this Agreement or the Utilities’s
policies.
The Utilities, acting by and through the Utilities Commission may immediately terminate
Employee’s employment under this Agreement for Cause by providing written notice of such
termination to Employee. As of the effective date of such termination of Employee’s employment
by the Utilities, the Utilities will be relieved of all obligations and liabilities to Employee under
this Agreement.
6.2. Without Cause/With Good Reason. In the event Employee’s employment under
this Agreement is terminated by the Utilities without Cause or by the Employee without Good
Reason (as “Good Reason” is defined below) at any time, Employee will be eligible for separation
pay as set forth in Section 6.6 below. Further, in the event of termination by the Utilities without
Cause or by the Employee without Good Reason, Employee, if requested by the Utilities, will
continue to render services to the Utilities up to the date of actual termination. Even if the Utilities
does not request Employee to continue to render such services, Employee will be paid Employee’s
regular compensation, plus any bonuses, expenses, or allowances accrued up to the date of actual
termination.
6.3.Death. Should Employee die during the term of this Agreement, this Agreement
will immediately terminate; but the Utilities will pay to Employee’s estate the compensation which
would otherwise be payable to Employee to the date of Employee’s death.
6.4. Disability. Should Employee be unable to perform Employee’s duties under this
Agreement due to disability, after being provided with any reasonable accommodation the Utilities
may be obligated by law to provide, this Agreement and Employee’s employment may be
terminated by the Utilities forthwith.
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6.5.By Employee for Good Reason. For purposes of this Agreement, “Good Reason”
means the occurrence of one or more of the following events without the Employee’s prior written
consent, provided that the Employee gives notice of his/her intent to resign for Good Reason within
90 days of his/her discovery of such event:
(a) a material diminution in Employee’s title or duties;
(b) a failure by the Utilities to provide Employee any material payments
or benefits owed to Employee;
(c) a material diminution of Employee’s compensation or benefits; or
(d) relocation of the Utilities’s offices to a place more than fifty (50)
miles away from the Utilities’s headquarters at the inception of
Employee’s employment.
Employee may terminate his employment at any time for “Good Reason,” provided that Employee
has provided the Utilities at least 60 days’ advance written notice stating the specific reason for
such resignation and provided that such reason has not been cured by the Utilities within said
notice period.
6.6. Severance Pay Upon Termination Without Cause or For Good Reason. On the
condition that Employee signs and does not rescind an agreement releasing claims arising out of
his/her employment, in a form prescribed by the Utilities, in the event that Employee’s
employment is terminated by the Utilities without Cause or by Employee for Good Reason, the
Utilities shall, subject to all conditions set forth in this Section 6, provide Employee the following
severance benefits “Severance Benefits”).
(a) Separation Pay. Subject to the conditions set forth in this section the
Utilities shall pay the Employee an amount equivalent to six months of the
Employee’s then-current Base Salary.
(b) COBRA Continuation Premiums. Subject to the conditions set forth in
this section the Utilities shall continue to pay the Employer portion of the
Employee’s group health insurance premium for the first six months of
Employee’s eligibility for COBRA continuation of health insurance.
(c) Earned and Unused Vacation. Employee shall be paid out for the amount
of earned but unused vacation time in his vacation account as of the date of
separation, provided they sign and do not rescind an agreement releasing
claims arising out of their employment, in a form prescribed by the Utilities,
less the amount of any debt then owed by Employee to the Utilities whether
or not such debt is then due or payable.
(d) Vacation Upon Retirement. Alternatively, if Employee retires
immediately eligible to claim his/her pension and gives the Utilities at least
60 days notice shall have 100% of unused vacation time converted into cash
and deposited into their Post Employment Health Care Savings account.
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(e) Sick Leave Conversion. Sick leave shall be subject to limited conversion
under the Health Care Savings Plan policy found in the Employee
Handbook. Pursuant to such policy, Employee will have 50% of unused
sick leave, up to a maximum of 120 days, converted into cash and deposited
into his/her Post Employment Health Care Savings account.
If the Utilities terminates the Employee for Cause, as defined below, then the Utilities shall not be
obligated to provide Employee the Severance Benefits.
The Utilities and the Employee may mutually agree to terminate the Employee’s employment
without Cause or Good Reason and in such circumstances the Utilities shall provide the Employee
the Severance Benefits unless the parties agree otherwise.
The form to be provided Employee for release of claims as stated above include adequate
provisions for at least the following: (i) Employee’s general release of any and all legal claims
against the Utilities and all affiliated entities and persons; (ii) Employee’s return of all of the
Utilities’s property and data; (iii) nondisparagement of the Utilities and any affiliated entities and
persons; (iv) confidentiality of separation terms; and (v) acknowledgement of Employee’s
continuing contractual obligations to the Utilities, including Employee’s continuing
noncompetition, confidentiality, and invention obligations under Sections 7, 8, and 9 of this
Agreement.
Any Severance Benefits due to Employee under this Section will, at the election of the Utilities,
be provided to Employee within two and one-half months following the end of the taxable year in
which Employee’s employment terminates, or no later than the end of the second taxable year
following the year of Employee’s termination, in such a manner as to qualify for an exemption
under Section 409A of the Internal Revenue Code of 1986, as amended, and regulations issued
thereunder.
7. Inventions.
7.1. Definition. The term “Inventions” as used herein will mean all concepts
(including business opportunities), discoveries, improvements, products, inventions, and works of
authorship (including literary, pictorial, sculptural, graphic, audio or visual works), whether
published or unpublished, whether patentable or unpatentable, in whatever form, that are made,
conceived, generated, or first reduced to writing, drawing, or practice solely by the Employee or
jointly by the Employee with others, during or after working hours, during Employee’s
employment by the Utilities and for a period of one (1) year after Employee’s employment with
the Utilities ends, regardless of the reason for such separation of employment, and relating to, or
arising out of any developments or products of, or pertaining to the business of the Utilities, its
divisions or its subsidiaries (companies in which the Utilities owns more than 10% of the voting
equity).
7.2. Obligation to Disclose and Assign. Employee agrees to promptly disclose to the
Utilities or its designee any and all Inventions that relate to the business of the Utilities and such
Inventions will be the absolute property of the Utilities. Upon request by the Utilities or its
designee and at the Utilities’s expense, and without additional compensation to the Employee, the
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Employee agrees to execute all the instruments deemed necessary by the Utilities or its designee
for the filing and prosecution of any applications for Letters Patent and/or copyright registration
(or their equivalent in countries other than the United States) on Inventions and agrees to perform
any and all acts deemed necessary by the Utilities to aid the Utilities in securing the allowance of
such applications or registrations.
At the Utilities’s expense, and without additional compensation to the Employee, the
Employee agrees to assign, and Employee hereby does assign to the Utilities, Employee’s entire
right, title, and interest in and to all of the Inventions that relate to the business of the Utilities and
in and to all applications for Letters Patent and/or copyright registration (or their equivalent in
countries other than the United States) that may be filed upon, and Employee agrees to execute
any documents necessary to make such assignments.
Notwithstanding the foregoing, Employee understands that this assignment of inventions
does not apply to any work of authorship for which no equipment, supplies, facility, or trade-secret
information of the Utilities was used and which was developed entirely on Employee’s own time,
and (a) which does not relate (i) directly to the business of the Utilities, or (ii) to the Utilities’s
actual or demonstrably anticipated research or development; or (b) which does not result from any
work performed by Employee for the Utilities.
7.3. Pre-existing Inventions. Employee has identified on Exhibit A attached hereto a
complete list of all inventions or improvements which have been made or conceived or first
reduced to practice by Employee alone or jointly with others prior to Employee’s employment by
the Utilities and which Employee desires to exclude from the operation of this Agreement. If there
is no such list on Exhibit A, Employee represents that Employee has made no such inventions or
improvements at the time of signing of this Agreement.
8. Non-Competition.
8.1. Acknowledgement. Employee acknowledges that (a) Employee’s services to be
performed for Utilities are of a special and unique nature; (b) the Utilities operates in a highly
competitive environment and would be substantially harmed if Employee were to compete with
Utilities or divulge its confidential information; (c) Employee has received valuable and sufficient
consideration for entering into this Agreement, including but not limited to the Utilities’s offer of
employment to Employee under this Agreement and the payments and benefits associated with
that employment, and receipt of the Utilities’s Confidential Information; and (d) the provisions of
this Section 9, including all of its subparts, are reasonable and necessary to protect the Utilities’s
business.
8.2. Covenant Not to Compete. Employee agrees that during Employee’s employment
with the Utilities and for an additional period of 12 months following the end of Employee’s
employment with the Utilities for any reason (the “Noncompete Period”), Employee will not,
within any geographic area in which the Utilities is engaged in developing, manufacturing,
marketing, distributing, or selling its products and services, directly or indirectly, hold any
ownership interest in (except a stockholder of a public company in which Employee owns less
than five percent (5%) of the issued and outstanding capital stock of such company), manage,
control, serve on the Board of Directors of, or render services of any kind in any capacity to any
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person or entity engaged in the development, manufacture, marketing, distribution, or sale of any
services or products of the same general type, which perform similar functions, or which are used
for the similar purposes as any product or service that is then or was during Employee’s last three
years of employment with the Utilities being developed, manufactured, marketed, distributed, or
sold by the Utilities.
8.3. Non-Solicitation of Customers or Vendors or Prospective Customers or
Vendors. Employee agrees that, during the Non-Compete Period, Employee will not directly or
indirectly (a) canvass, solicit, or accept business concerning any service or product that competes
with a service or product of the Utilities from any person or entity who is then or was during
Employee’s last three years of employment with the Utilities a customer or vendor or a prospective
customer or vendor of the Utilities with whom Employee had contact while an Employee of the
Utilities or about whom Employee has Confidential Information; or (b) otherwise take any action
to divert business from or curtail the business of the Utilities.
8.4. Non-Solicitation of Employees or Business Relations. Employee agrees that,
during the Non-Compete Period, Employee will not, directly or indirectly, take any action to
solicit, recruit, encourage, or assist any employee or any supplier, vendor, consultant, independent
contractor, subcontractor, or any other business relation (each a “Business Relation”) of the
Utilities to terminate, curtail, or lessen his, her, or its relationship with the Utilities. Employee
further agrees that Employee’s obligations set forth in this Section 8.4 will apply regardless of
whether Employee initiates contact with a Utilities employee or Business Relation or the Utilities
employee or Business Relation initiates contact with the Employee.
8.5. Disclosure of Obligations. During the Non-Compete Period, Employee will, prior
to accepting employment or any other business relationship with any other person or entity, inform
that person or entity of Employee’s obligations under this Agreement.
8.6. Extension of Non-Compete Period. If the Utilities obtains a court ruling or
judgment finding that Employee has violated any portion of Section 8, Employee agrees that the
Non-Compete Period will be extended for a period of time equal to the period of time during which
Employee was found to be in breach of this Section 8.
9. Use of Name and Photograph. Employee consents to the present or future use and any
reproduction of Employee’s name and photograph, or either, in any facilities brochure or other
advertising or publications of the Utilities. Employee further consents to the entering of
Employee’s name and telephone number onto any employee list which is public as to other Utilities
employees and Employee waives any rights to prevent Utilities employees from obtaining this
information. Employee promises to hold the Utilities harmless for allowing its employees to
access this information and promises to hold the Utilities harmless for all non-willful disclosures
to anyone who is not a Utilities employee. Employee agrees to sign the Utilities’s standard
Consent to Release of Private data form in partial satisfaction of the requirements of this Section
9.
10. Employee Representations and Warranties. Employee represents and warrants that the
performance of Employee’s duties for the Utilities and Employee’s obligations under this
Agreement does not and will not cause Employee to violate the terms of any agreement,
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commitment, or understanding Employee has with any other person or entity, including, but not
limited to, any invention or intellectual property assignment agreement, any noncompete or
nonsolicitation agreement, or any agreement to keep in confidence the trade secrets, proprietary,
or other confidential information of such person or entity. Employee also represents and warrants
that Employee has not brought and will not bring to the Utilities, or use for the benefit of the
Utilities, any materials, information, and/or documents of any person or entity that are not
generally available to the public or within the Utilities’s trade, unless Employee has obtained
written authorization from any such person or entity permitting Employee to retain and use said
materials, information, and/or documents. Employee hereby further represents and warrants that
Employee’s use (or the Utilities’s use) of any materials, information, and/or documents Employee
may bring to the Utilities for use in Employee’s employment will not violate the intellectual
property rights of any other person or entity. Employee further agrees to indemnify and hold
harmless the Utilities against any expenses, damages, costs, losses, or fees (including legal fees)
incurred by Utilities in any suit, claim, or proceeding brought by any third party based on a fact
which constitutes a breach of the warranty set forth in this Section 11.
11. Section 409A of the Internal Revenue Code. This Agreement is intended to comply with
Section 409A of the Internal Revenue Code or an exemption thereunder and will be construed and
administered in accordance with Section 409A. Notwithstanding any other provision of this
Agreement, payments provided under this Agreement may only be made upon an event and in a
manner that complies with Section 409A or an applicable exemption. Any payments under this
Agreement that may be excluded from Section 409A either as separation pay due to an involuntary
separation from service or as a short-term deferral will be excluded from Section 409A to the
maximum extent possible. For purposes of Section 409A, each installment payment provided
under this Agreement will be treated as a separate payment. Any payments to be made under this
Agreement upon a termination of employment will only be made upon a “separation from service”
under Section 409A. Notwithstanding the foregoing, the Utilities makes no representations that
the payments and benefits provided under this Agreement comply with Section 409A and in no
event will the Utilities be liable for all or any portion of any taxes, penalties, interest, or other
expenses that may be incurred by the Executive on account of non-compliance with Section 409A.
Notwithstanding any other provision of this Agreement, if any payment or benefit provided to
Employee in connection with Employee’s termination of employment is determined to constitute
“nonqualified deferred compensation” within the meaning of Section 409A and Employee is
determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment
or benefit will not be paid until the first payroll date to occur following the six-month anniversary
of the Employee’s effective termination date (the “Specified Employee Payment Date”). The
aggregate of any payments that would otherwise have been paid before the Specified Employee
Payment Date will be paid to Employee in a lump sum on the Specified Employee Payment Date
and thereafter any remaining payments will be paid without delay in accordance with their original
schedule.
12. Miscellaneous.
12.1. Governing Law. This Agreement and all matters arising out of or relating to this
Agreement will be governed by, construed, and enforced in accordance with the laws of the State
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of Minnesota without giving effect to any choice or conflict of law doctrine that otherwise might
be applicable.
12.2.Submission to Jurisdiction. Any legal suit, action, or proceeding arising out of or
relating in any way to this Agreement or the transactions contemplated hereby will be instituted
exclusively in the courts of competent jurisdiction located in the State of Minnesota. The parties
hereto consent to the exclusive jurisdiction of such courts in any such suit, action, or proceeding,
and consent to personal jurisdiction in such courts.
12.3. Notice. All notices, requests, consents, claims, demands, waivers and other
communications under this Agreement must be in writing and will be deemed effectively given
(a) on the date delivered by hand, sent by facsimile (with evidence of successful transmittal), or
sent by e-mail (with evidence of successful transmittal) if delivered/sent during normal business
hours of the recipient, and on the next business day if delivered/sent after normal business hours
of the recipient; (b) on the second business day after delivery to a nationally recognized overnight
courier; or (c) on the third business day after the date mailed by certified or registered mail, postage
prepaid. Such communications must be sent to the respective parties at the following address: (a)
if to the Utilities, to the address of its then principal office; and (b) if to Employee, to the address
last shown in the records of the Utilities.
12.4. Entire Agreement. This Agreement, together with all related exhibits and
schedules, any other documents incorporated herein by reference, and any and all other documents,
instruments, or other agreements executed in connection with this Agreement or otherwise
executed in connection with or arising out of the transactions contemplated by this Agreement,
constitute the sole and entire agreement and understanding of the parties hereto with respect to the
subject matter hereof and thereof, and replace and supersede any and all prior oral and written
understandings, agreements, representations, warranties, and discussions with respect to such
subject matter.
12.5. Payments. All amounts paid under this Agreement will be subject to normal
withholdings or such other treatment as required by law.
12.6. Survival of Sections 5 & 7-10. Employee’s confidentiality, inventions, and
noncompete and other obligations set forth at Section 5 and Sections 7through 10 of this
Agreement will survive the termination of this Agreement and Employee’s termination of
employment with the Utilities, regardless of the reason for such terminations.
12.7. Counterparts; Electronic Transmission. This Agreement may be executed in
counterparts, each of which will be deemed an original copy of this Agreement but all of which
together will be deemed to be one and the same agreement. A signed copy of this Agreement
delivered by facsimile, e-mail attachment, or other means of electronic transmission will be
deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
12.8. Successors and Assigns. This Agreement is personal in nature to the Employee
and the Employee will not assign, transfer, or delegate any right, interest, or obligation hereunder
in whole or in part, without the prior written consent of the Utilities. The rights, interests, and
obligations of the Utilitiesunder this Agreement may, in the discretion of the Utilities, be
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transferred to the Utilities’s successors and assigns. Any purported assignment in violation of this
Section will be null and void. In the event any assignment is made, this Agreement will be binding
upon and inure to the benefit of the parties and their respective permitted successors and assigns.
12.9.Cumulative Remedies. The rights and remedies under this Agreement are
cumulative and are in addition to and not in substitution for any other rights and remedies available
at law or in equity or otherwise.
12.10.Equitable Remedies. Employee acknowledges that a breach or threatened breach
of any of its obligations under Section 5 or Sections 7 through 10, would give rise to irreparable
harm to the Utilities for which monetary damages would not be an adequate remedy, and hereby
agrees that in the event of a breach or a threatened breach by Employee of any such obligations,
the Utilities will, in addition to any and all other rights and remedies that may be available to it in
respect of such breach, be entitled to equitable relief, including a temporary restraining order, an
injunction, specific performance, and any other relief that may be available from a court of
competent jurisdiction (without any requirement to post bond).
12.11. Amendment. This Agreement may be amended, modified, or supplemented only
by an agreement in writing executed by all of the parties to this Agreement.
12.12. Waiver. No waiver by any party of any of the provisions hereof will be effective
unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party
will operate or be construed as a waiver in respect of any failure, breach, or default not expressly
identified by such written waiver, whether of a similar or different character, and whether
occurring before or after that waiver. No failure to exercise, or delay in exercising, any right,
remedy, power or privilege arising from this Agreement will operate or be construed as a waiver
thereof; nor will any single or partial exercise of any right, remedy, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or
privilege.
12.13. Severability; Blue Pencil. If any term or provision of this Agreement is found to
be invalid, illegal, or unenforceable under applicable law, such provision will be ineffective only
to the extent of such invalidity, illegality, or unenforceability without invalidating the remainder
of such provision or any other term or provision of this Agreement. To the extent legally
permissible, any such illegal, invalid, or unenforceable provision will be replaced by a valid
provision that will implement the commercial purpose of the Agreement.
12.14. Headings, Gender, Etc. The headings in this Agreement are for convenience only
and will not in any way affect the meaning or interpretation of this Agreement. Except where the
context requires otherwise, the use of terminology of any of the masculine, feminine, or neuter
genders will include all such genders, and the use of the singular number will include the plural
and vice versa.
12.15. Third-Party Beneficiaries. Employee acknowledges and agrees that the Affiliates
are third-party beneficiaries of this Agreement and may enforce the provisions of this Agreement
that confer benefits on them as if they were each a signatory to this Agreement.
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\[SIGNATURE PAGE FOLLOWS\]
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Exhibit A
PRE-EXISTING INVENTIONS AND IMPROVEMENTS
Name/Title of Invention or Improvement* Description of Invention or Improvement
* Note: If no Inventions or Improvements are listed above, Employee executing the attached
Confidentiality, Non-Solicitation and Invention Agreement represents that none exist.
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