SEVERANCE AGREEMENT AND MUTUAL RELEASE
This Severance Agreement and Mutual Release ("Agreement") is entered
into by and between M. Xxx Xxxxxxx, an individual ("Employee"), and Diversified
Corporate Resources, Inc. ("DCRI"), effective as of March 15, 2001. Employee and
DCRI are referred to collectively as the "Parties" and agree as follows:
1. ENTIRE SETTLEMENT AGREEMENT. Employee and DCRI mutually agree to
discontinue their current employment relationship and to resolve and
amicably settle all issues related to Employee's employment at DCRI on
the terms and conditions contained in this Agreement. This Agreement
sets forth the entire agreement between the Parties and supersedes any
and all prior oral or written agreements or understandings between the
Parties, including but not limited to the Amended and Restated
Employment Agreement ("Employment Agreement") dated August 11, 2000.
2. SUBMISSION AND ACCEPTANCE OF RESIGNATION. In consideration of this
Agreement and effective March 15, 2001 (the "Separation Date"),
Employee voluntarily resigns his employment as President of DCRI, as
well as any position on the Board of Directors and any position as an
officer or director of any of the DCRI Released Parties. DCRI accepts
Employee's resignation effective March 15, 2001. DCRI will pay Employee
his base salary earned through the Separation Date.
3. SEPARATION BENEFITS. To provide Employee with benefits that he would
not otherwise be entitled to receive, the Parties agree as follows:
x. XXXXXXXXX PAY. Over a twelve (12) month period, DCRI
will pay Employee a severance pay in the total amount
of Two Hundred and Ten Thousand and No/100's Dollars
($210,000.00), minus applicable withholdings as
required by law and interest deductions for those
certain Promissory Notes dated as of July 17, 1998 in
the original principal amount of $148,580.53 ("July
Note") and as of October 12, 1998 in the original
principal amount of $125,300.00 ("October Note"). The
severance pay shall be made in twenty-four (24)
equal, semi-monthly installments in accordance with
DCRI's existing payroll practices, commencing March
15, 2001.
b. EXECUTIVE BONUS PLAN. Employee shall receive any
earned but unpaid bonus for fiscal year 2000 and his
pro rata bonus for fiscal year 2001 (74/365 for the
period from Jan. 1st through March 15th ) in
accordance with the terms and conditions of the
Executive Bonus Plan. DCRI shall continue to
administer the Executive Bonus Plan in good faith and
not arbitrarily decrease Employee's cash bonus
entitlement. Payment of the FY2000 and FY2001 cash
bonus shall be made to Employee when performance
bonuses under the Executive Bonus Plan are
distributed to other DCRI executives and employees.
Employee shall not be entitled to any additional
bonus compensation.
SETTLEMENT AGREEMENT AND RELEASE - PAGE 1
c. HEALTH INSURANCE BENEFITS. DCRI agrees to pay on
behalf of Employee the applicable monthly premium
which is required under the Consolidated Omnibus
Budget Reconciliation Act, as amended ("COBRA"), to
continue his group health insurance coverage to the
extent such coverage was in effect on the date
immediately prior to the Separation Date. DCRI shall
continue to make the monthly COBRA premium payment on
Employee's behalf until the earliest of: (i) the
first date that Employee becomes eligible for medical
coverage under any other group medical plan; (ii) the
date Employee elects to discontinue medical coverage
for himself and his dependents; or (iii) March 15,
2002. Employee shall provide written notice to DCRI
of the occurrence of any event described in subpart
(i) or (ii) within five (5) days thereof.
d. VESTING AND EXERCISE OF STOCK OPTIONS. Employee shall
execute the following Ancillary Documents to
accelerate the vesting of 5,556 shares of DCRI stock
which would otherwise vest on March 31, 2001 and to
permit the exercise of Employee's vested stock
options at any time through December 31, 2002,
subject to the other provisions of the applicable
stock option agreement and stock option plan
(incorporated herein by reference): (i) Second
Amendment to 1996 Stock Option Agreement attached
hereto as Exhibit A; and (ii) Second Amendment to
1998 Stock Option Agreement attached hereto as
Exhibit B. Employee shall not be entitled to any
additional stock options.
e. EXTENSION OF OCTOBER NOTE'S MATURITY DATE AND EVENT
OF DEFAULT. The Parties agree to extend the Maturity
Date of the October Note from October 12, 2001 to
July 17, 2003 and shall execute the Amendment to
Promissory Note attached hereto as Exhibit C.
Employee shall timely pay the July and October Notes
but shall not be required to provide additional
security for the July and October Notes. Employee may
sell such security from time to time but all proceeds
therefrom shall be applied to satisfy the secured
debt until paid in full.
f. DEFERRED COMPENSATION BENEFITS. All amounts and other
benefits, if any, funded or otherwise due as of the
Separation Date pursuant to DCRI's deferred
compensation program for Employee as referenced in
paragraph 6(d) (first paragraph thereof) of the
Employment Agreement. The deferred compensation shall
be paid or transferred to Employee within seven (7)
days of the execution of this Agreement in the manner
contemplated by the deferred compensation program.
g. 401K BENEFITS. Employee shall retain all benefits he
may have under DCRI's 401k Plan.
SETTLEMENT AGREEMENT AND RELEASE - PAGE 2
h. LETTER OF REFERENCE. DCRI will provide a letter of
reference for Employee, signed in the form attached
as Exhibit D, and such letter shall be signed by J.
Xxxxxxx Xxxxx. Employee may request additional
reference letters from other officers or directors as
they may agree upon.
i. UNPAID VACATION. Within seven (7) days of the
execution of this Agreement, Employee shall be paid
for his accrued but unused vacation time as of the
Separation Date.
4. NON-DISPARAGEMENT. The Parties mutually agree not to libel, slander,
defame or otherwise disparage each other. Employee shall make no
disparaging comments which may tend to injure the business of DCRI, its
officers, directors or employees or that would encourage any entity or
person to refrain from or cease doing business with DCRI. Likewise,
DCRI shall use good faith efforts to ensure that its officers and
directors make no disparaging comments about Employee. Employee's
personnel file will reflect that he voluntarily resigned, and DCRI will
place a memorandum in his personnel file directing that in the event
DCRI receives a reference inquiry from a prospective employer
concerning M. Xxx Xxxxxxx, such individuals shall be referred to
Xxxxxxx Xxxxxxxxx, Vice President of Human Resources (or her
successor), who will provide the individual with a copy of the
reference letter identified in paragraph 3(h) above and that only such
reference letter is authorized to be released. Nothing contained in
this paragraph four (4), however, shall be construed to limit or
otherwise restrict the Parties from prosecuting, defending, providing
testimony or responding to governmental process in any judicial or
administrative proceeding. In the absence of a court judgment or order
confirming a violation of this paragraph four (4), an alleged violation
of paragraph four (4) shall not serve as a basis to relieve the other
party from its obligations arising under this Agreement.
5. NON-SOLICITATION COVENANT. Employee acknowledges that, as part of his
employment with DCRI, he has become familiar with the salary, pay
scale, capabilities, experiences, skill and desires of DCRI's employees
and the proprietary and confidential information relating to DCRI's
customers. In order to protect the confidentiality of such information
and the legitimate business interests of DCRI, Employee agrees that,
for a period of twelve (12) months following the effective date of this
Agreement, Employee shall not:
a. Recruit, hire, employ, solicit for employment, or
attempt to recruit, hire, employ or solicit for
employment, directly or indirectly, any DCRI employee
or consultant who is currently employed or engaged as
of the effective date of this Agreement; and/or
b. Solicit, divert, approach or seek staffing services
business from any DCRI customer, refer business from
any DCRI customer to any competitive business, or be
paid commission(s) or bonus(es) based on sales
received by any competitive business from any DCRI
customer. For purposes of this Agreement, the term
"DCRI customer" means any person, firm, corporation,
partnership, association, or other entity to which
DCRI
SETTLEMENT AGREEMENT AND RELEASE - PAGE 3
provided staffing services during the twelve (12)
months prior to the effective date of this Agreement.
6. NON-DISCLOSURE COVENANT. Employee shall not at any time disclose or
reveal to any person or entity any trade secrets or confidential
information of DCRI or the DCRI Released Parties or of any third party
that DCRI is under an obligation to keep confidential. In particular,
Employee agrees that he will not disclose any confidential or
proprietary information regarding DCRI's internal business operations
such as the following: the methods, processes, systems and know-how
used, developed or acquired by DCRI in its business; the identity of
and any personnel information regarding prospective and current
employees; and/or the pricing, margins, sensitive financial
information, strategic business plans, market research studies,
promotional ideas, customer lists, key customer contacts, prospective
customers, marketing techniques or plans, employee information or other
key business initiatives or projects of DCRI. This restriction does not
apply, however, to information that at the time of disclosure is in the
public domain through no fault of Employee, information Employee
received from a third party that was disclosed without a breach of
confidentiality or information approved for release by written
authorization of DCRI.
7. RETURN OF DCRI PROPERTY AND FILES. Employee will not remove any of
DCRI's property from its premises and, within seventy-two (72) hours of
the Parties executing this Agreement, shall return the originals and
all copies thereof of all notes, files, computer equipment, memoranda,
reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials of any nature
(collectively, the "Materials") relating directly or indirectly, to
DCRI or any DCRI Released Party. This turnover provision shall not
apply to attorney-client communications between Employee and Employee's
counsel. In the event Employee thereafter discovers additional DCRI
property or documents, Employee shall provide such documents to DCRI or
DCRI's counsel within three (3) business days. Excepting only the
Employment Agreements, benefits plans and any public documents filed
with the SEC, Employee will not retain, use or permit to be used any
such notes, files, memoranda, reports, lists, records, drawings,
sketches, specifications, software programs, data, documentation or
other materials, and Employee acknowledges and agrees that all of the
foregoing will be and shall remain the sole and exclusive property of
DCRI. Employee shall additionally provide a subset of the Materials to
DCRI's counsel, Xxx Xxxxxxxxxx, and Xxxxxxxxxx shall keep and maintain
such subset under seal until: (i) Employee is a party to arbitration or
litigation involving DCRI, its officers, directors or shareholders, at
which time Xxxxxxxxxx shall return the sealed subset to Employee upon
written request; or (ii) April 1, 2005.
8. CONTINUING DUTY TO COOPERATE. Employee agrees to fully cooperate in
good faith with DCRI and its counsel in its defense of, or other
participation in, any administrative, judicial or other proceedings
arising from any charge, complaint or other action which has or may be
filed relating to events which occurred, in whole or in part, during
Employee's tenure of employment with DCRI. DCRI agrees to cooperate in
good faith with Employee and his counsel in the defense of any
administrative, judicial or other proceedings arising from any charge,
complaint or other action which has or may be filed
SETTLEMENT AGREEMENT AND RELEASE - PAGE 4
against Employee relating to events which occurred, in whole or in
part, during Employee's tenure of employment with DCRI. Employee
shall comply with all reasonable requests to provide information to
and assist DCRI in responding to or complying with any discovery,
inquiries, investigations, requests for information, or subpoenas by
any opposing party or any federal, state, or local government agency
(further including, without limitation, the Securities and Exchange
Commission ("SEC") and the American Stock Exchange). Within seven (7)
days of the execution of this Agreement, Employee shall also sign any
entries in the minutes book of the Board of Directors, which
previously have been entered unsigned. DCRI agrees to fully cooperate
in good faith with Employee in responding to reference inquiries in
order for him to obtain alternative employment and shall designate
Xxxxxxx Xxxxxxxxx, Vice President of Human Resources, or her
successor as the contact person to respond to all such inquiries. In
addition, DCRI will transition the business and other affairs of
Employee in good faith, including forwarding Employee's mail to his
designated address, permitting the retrieval or delivery of his
personal belongings and such other routine matters that may arise.
9. "GOING-PRIVATE" TRANSACTION. If DCRI undertakes a "going-private"
transaction within the meaning of Rule 13e-3 promulgated by the SEC
pursuant to Section 13(e) of the Securities Exchange Act of 1934, as
amended, Employee as a holder of issued and outstanding shares of
common stock of DCRI and as a holder of options to purchase common
stock of DCRI will be treated in the same manner as any other
unaffiliated security holder, as defined in Section 13e-3. In such
event, DCRI, to the extent permitted by law, will purchase any issued
and outstanding shares of common stock of DCRI at a price equal to fair
market value of DCRI common stock, which for this purpose will have the
same meaning as the term "fair market value" defined in Section 3(c) of
Employee's 1998 Stock Option Agreement, as amended, as of the last
business day (the "Measuring Date") prior to the effective date of such
going-private transaction; provided, however, that such purchase
obligation shall not apply in the event that the material terms of such
going-private transaction have been disclosed in written notice by
certified mail, return receipt requested, to Employee's address at 0000
Xxxxx Xxxxxxx Xxxxx, Xxxxxxxxxx, Xxxxx 00000-0000, and in a report or
other document filed with the SEC by DCRI at least fifteen (15) days
prior to the Measuring Date. Employee shall have the continuing duty to
timely notify DCRI of any changes to his residential address for
receipt of notice purposes pursuant to the terms of this Agreement.
10. GENERAL RELEASE AND WAIVER BY EMPLOYEE. In consideration of this
Agreement, Employee, on behalf of himself and his family, assigns,
representatives, agents, heirs and/or attorneys, if any, hereby fully,
finally, and forever releases, acquits and discharges DCRI, along with
its former and present parent, subsidiary, and/or affiliate companies,
predecessors, successors and/or assigns, as well as DCRI's officers,
administrators, directors, shareholders, investors, general or limited
partners, representatives, agents, employees and/or attorneys, jointly
and severally (collectively, the "DCRI Released Parties"), in their
individual or corporate capacities, from any and all claims, demands,
actions, liabilities, promises, obligations, damages, and/or causes of
action of whatever kind or character, known or unknown, asserted or
unasserted, arising prior to or existing at the time of the execution
of this agreement which employee has or might claim to have
SETTLEMENT AGREEMENT AND RELEASE - PAGE 5
against any of the DCRI Released Parties. By way of illustration, this
general release includes, without limitation:
a. Any claim arising under the Employment Agreement or
otherwise relating to any alleged breach of any oral
or written promise or employment contract;
b. Any claim under state or federal law which provides
civil remedies for the enforcement of rights arising
out of the employment relationship, including,
without limitation, discrimination claims arising
under Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. Section 2000 ET. SEQ.; Civil
Rights Act of 1866, 42 U.S.C. Section 1981; Civil
Rights Act of 1991, 42 U.S.C. Section 1981a; Age
Discrimination in Employment Act, 29 U.S.C. Section
621 ET. SEQ.; Americans With Disabilities Act, 42
U.S.C. Section 12101 ET. SEQ.; Fair Labor Standards
Act, 29 U.S.C. Section 201, ET. SEQ.; Employee
Retirement Income Security Act, 29 U.S.C. Section
1000 ET. SEQ.; Family and Medical Leave Act, 29
U.S.C. Section 2601, ET. SEQ.; or any other statute
prohibiting discrimination in employment under any
federal, state or local law;
c. Claims for unpaid or withheld wages, bonuses,
employee benefits, stock or stock options, deferred
compensation, commissions, or profit-sharing,
together with any claims for wrongful discharge,
promissory estoppel, fraud, breach of any implied
covenants, assault, battery, negligence, negligent
hiring, negligent retention, defamation, slander,
invasion of privacy, or intentional infliction of
emotional distress; or
d. Any claim by Employee, directly or derivatively, in
his capacity as a shareholder against DCRI or any of
the DCRI Released Parties or their officers or
directors for breach of any duty owed to the
shareholders of DCRI or any of the DCRI Released
Parties.
This Agreement shall not, however, release or waive any claim or cause
of action that may arise (i) under the terms of this Agreement; (ii)
after the execution of this Agreement; or (iii) pursuant to any
transaction between Employee and J. Xxxxxxx Xxxxx regarding L.P. #2.
11. GENERAL RELEASE AND WAIVER BY DCRI. In consideration of this Agreement,
DCRI and its officers, directors, attorneys, employees, agents, parent
companies, subsidiaries and affiliate companies, in their individual
and corporate capacities, hereby fully, finally, and forever release,
acquit and discharge Employee, in his individual and corporate
capacity, from any and all claims, demands, actions, liabilities,
promises, obligations, damages, and/or causes of action of whatever
kind or character, known or unknown, asserted or unasserted, arising
prior to or existing at the time of the execution of this agreement
which they have or might claim to have against Employee. This paragraph
shall not release or waive any claim or cause of action that DCRI or
they may have or that may arise against Employee, in his official or
individual capacity, (i) under the terms of this
SETTLEMENT AGREEMENT AND RELEASE - PAGE 6
Agreement; (ii) after the execution of this Agreement; (iii) any
shareholder derivative litigation; or (iv) relating to the DITTO
litigation and/or the D&O coverage or lack thereof. If eligible,
Employee shall receive the benefit of any applicable D&O or other
insurance coverage.
12. COVENANT NOT TO XXX. Employee shall not initiate or bring any
administrative, legal or other action against DCRI or any of the DCRI
Released Parties for any claim waived and released under this Agreement
which may have existed prior to the execution of this Agreement, and
Employee represents and warrants that no such claim has been filed to
date. If a Court determines that Employee has violated this paragraph
twelve (12), then Employee shall bear all legal fees and costs,
including those incurred by DCRI and/or the DCRI Released Parties
relating thereto.
13. WAIVER OF RE-EMPLOYMENT. Employee agrees not to knowingly seek
employment with, or to submit an application to, DCRI or any DCRI
Released Party at any time in the future.
14. CONSIDERATION PERIOD. Employee has been advised by DCRI that he has the
right to discuss any aspect of this Agreement with counsel and to
consult with an attorney before executing this Agreement, and Employee
has done so. By executing this Agreement, Employee acknowledges that he
considered its terms for twenty-one (21) days or waived his right to do
so.
15. REVOCATION PERIOD. Following the execution of this Agreement on March
14, 2001, and within seven (7) days thereafter, Employee may revoke
this Agreement as to his release and waiver of any age discrimination
in employment claims. If Employee revokes the Agreement as to such age
discrimination claims on or before March 21, 2001, and only in such
event, then the severance pay set forth in paragraph 3(a) above shall
be reduced to One Hundred and Sixty Thousand and No 100's Dollars
($160,000.00), minus applicable withholdings and interest deductions,
with the balance payable in equal, semi-monthly installments in
accordance with DCRI's normal payroll procedures.
16. TRANSFER OF RIGHTS/SUCCESSORS AND ASSIGNS. Employee represents and
warrants that he has not transferred or assigned, or purported to
transfer or assign, to any person or entity any claim involving or
against DCRI (or any of the DCRI Released Parties) or any portion
thereof or interest therein. This Agreement shall be binding on the
Parties and upon their heirs, administrators, representatives,
executors, successors and assigns and shall inure to the benefit and to
that of their heirs, administrators, representatives, executors,
successors and assigns.
17. GOVERNING LAW AND VENUE. The laws of the State of Texas or, where
applicable, the law of the United States, shall govern the validity,
interpretation and effect of this Agreement.
18. SEVERABILITY. The provisions of this Agreement are severable. If any
provision is held to be invalid or unenforceable, it shall not affect
the validity or enforceability of any other provision.
SETTLEMENT AGREEMENT AND RELEASE - PAGE 7
19. ARBITRATION AND VENUE. Excepting only disputes involving temporary or
permanent injunctive relief to enforce the non-solicitation or
non-disclosure obligations imposed by this Agreement, the Parties agree
to submit any controversy involving the construction or application of
any of the terms, covenants, or conditions of this Agreement
(including, but not limited to, the determination of any amounts
payable under the terms of this Agreement) to binding arbitration in
Dallas County, Texas if either Party to this Agreement shall request
arbitration by notice to the other Party. The Parties also agree that
any decision resulting from such arbitration shall be final. The
Parties incorporate herein by reference paragraph 13(c) of the
Employment Agreement as to the appointment of arbitrators and the
expenses of arbitration.
20. ACCEPTANCE OF AGREEMENT. By signing this Agreement, the Parties declare
that the terms of this Agreement have been completely read, are fully
understood, and are voluntarily accepted without any undue influence or
coercion, after complete consideration of all facts and their
respective legal rights.
AGREED TO AND ACCEPTED as of the 14th day of March, 2001:
M. XXX XXXXXXX: DIVERSIFIED CORPORATE RESOURCES,
INC.
/s/ M. Xxx Xxxxxxx By: /s/ J. Xxxxxxx Xxxxx
---------------------------- -----------------------------------
J. Xxxxxxx Xxxxx
Chief Executive Officer
On Behalf of the Board of Directors
SETTLEMENT AGREEMENT AND RELEASE - PAGE 8
