RELEASE AND AMENDED EMPLOYMENT AGREEMENT
EXHIBIT 10.2
RELEASE AND AMENDED EMPLOYMENT AGREEMENT
This Release and Amended Employment Agreement (the “Agreement”) is entered into by and between
Xxxxxxxx X. Xxxxx (hereinafter “Xxxxx”), on the one hand and Xxxx Industries Inc., on the other hand
(hereinafter collectively referred to as the “Company”).
Recitals
A. WHEREAS, Xxxxx is employed by the Company as its Chief Financial Officer;
B. WHEREAS, Xxxxx and the Company have decided to modify their existing employment
relationship, effective January 8, 2007 through January 26, 2007 and thereafter enter into a
certain period during which Xxxxx will serve the Company as a consultant;
NOW THEREFORE, in consideration of the covenants and promises contained in this Agreement and
other good and valuable consideration, it is hereby agreed among the parties as follows:
Agreement
1. Conversion of Employment Relationship/Termination of Agreements.
1.1 Effective January 8, 2007, Xxxxx shall no longer serve the Company as its Chief Financial
Officer or Officer of the Company. Rather, for the period beginning January 8, 2007 and ending January 26, 2007 (the
“Modified Employment Arrangement Period”), Xxxxx shall serve the Company as a full-time employee in
the capacity of advisor to the Chief Executive Officer.
1.2 Effective January 26, 2007 (the “Separation Date”), Xxxxx’x employment relationship with
the Company shall end and, subject to Paragraph 1.3, the Severance Agreement entered into by and
between Xxxxx and the Company, dated as of January 13, 2005 and the Amended Severance Agreement,
dated as of August 16, 2006 (collectively the “Severance Agreement”), shall terminate and be of no
further force or effect. On the Separation Date, the Company shall pay Xxxxx any accrued but
unpaid salary through the Separation Date, any accrued but unpaid vacation through the Separation
Date in accordance with the Company’s vacation policy, any and all amounts contributed to the
Executive Compensation Deferral Plans, in accordance with the payment provisions of those plans,
and any unreimbursed business expenses incurred on or prior to the Separation Date, subject to
submission by Xxxxx of documentation in accordance with the Company’s reimbursement policy.
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Except for this Agreement, the Statement of Confidentiality dated as of the date hereof and
being executed concurrently herewith (the “Confidentiality Agreement”), the Option Agreement
(defined below), and as set forth under Paragraph 6 of the January 13, 2005 Severance Agreement,
all other agreements between the Company and Xxxxx shall terminate and be of no further force or
effect as of the Separation Date.
2. Modified Employment Arrangement. Provided that Xxxxx executes this Agreement and
does not revoke this Agreement as set forth in Paragraph 11 below, the Company shall continue to
employ Xxxxx as an advisor to the Company’s Chief Executive Officer during the Modified
Employment Arrangement Period. As an advisor to the Chief Executive Officer, Xxxxx shall
perform tasks regarding all financial aspects of the Company including, but not limited to,
advising on the Company’s 10-Q and other similar filings. In exchange for Xxxxx’x services to the
Company in this advisory role during the Modified Employment Arrangement Period, the Company shall
pay to Xxxxx his current base salary (at the level of $170,000 annually) on a pro rata basis.
During the Modified Employment Arrangement Period, Xxxxx shall provide his services exclusively to
the Company and shall not provide services of any nature to any other person or entity without the
Company’s prior written consent.
3. Consulting Arrangement. From January 27, 2007 through April 15, 2007 (the
“Part-Time Consulting Period”), Xxxxx shall make himself available to the Company on an as needed
basis (not to exceed 10 hours per month without the mutual consent of both Xxxxx and the Company)
to assist the Company in matters that may arise in which Xxxxx’x expertise and/or first hand
knowledge may be required. Whether the Company contacts Xxxxx and requests Xxxxx’x assistance
during the Part-Time Consulting Period shall remain in the sole discretion of the Company. Other
than the compensation and benefits set forth in Paragraph 5, below, and the other promises made by
the Company herein, Xxxxx shall not receive any compensation or benefits for his agreement to
provide services during the Part-Time Consulting Period other than
reimbursement for reasonable business expenses incurred while
performing his Part-Time Consulting duties.
4. Equity Awards/No Accrual of Other Benefits.
(a) During the term of his employment with the Company, Xxxxx was granted stock options (the
"Option”) to purchase shares of the Company’s Common Stock. The grant was made pursuant and
subject to the terms and conditions of the Company’s 1994 Stock Option Plan (the “Plan”), copies of
which plans were previously provided to Xxxxx. The Option grant was made pursuant to an Employee
Stock Option Agreement dated June 3, 2002 (the “Option Agreement”).
(b) Xxxxx acknowledges and agrees that except as set forth in this Paragraph 4, he is not
entitled to, nor shall he make any claim for, any other equity interest in the Company of any type
whatsoever, including, but not limited to, any other stock option, any shares of any class or
series of capital stock in the Company or any security of the Company. Xxxxx further acknowledges
and agrees that he waives any claim of right to any other equity interest in the Company not
specifically set forth in this Paragraph 4.
(c) Xxxxx agrees, to the maximum extent allowed by law: (i) that he shall be solely liable for
and shall pay any and all taxes, costs, interest, assessments, penalties, damages, attorney’s fees
or other losses to which he is or may be subject by reason of the payments by the Company to him
identified in Paragraph 5 of this Agreement, and by reason of the equity interest identified in
Paragraph 4 of this Agreement; (ii) to indemnify and hold the Company Releasees (defined below)
harmless from any and all taxes, costs, assessment, interest, penalties, damages, attorney’s fees
or other losses to which the Company Releasees, or any of them, are or may be subject by reason of
such payments, interest, reimbursements and/or loans, including, but not limited to, any claim or
claims against the Company Releasees, for failure to withhold or under withholding of taxes; (iii)
not to seek or make any claim or claims against the Company Releasees, or any of them, for
contribution, indemnity, compensation, recompense, damages, taxes, costs, interest, penalties,
attorneys’ fees or other losses, if a determination is made that withholdings should have been made
from any payments to Xxxxx; and (iv) to assume responsibility for contesting and defending any
claim or assertion that withholding should have been made from any payment or other interest
provided, or that the Company Releasees, or any of them, owe taxes thereon for any reason, and to
cooperate fully in the defense of any such claim or claims which is/are brought against the Company
Releases, or any of them.
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5. Further Consideration For Xxxxx’x Agreement Hereunder. Provided that Xxxxx
executes this Agreement (and does not revoke it), and provided that Xxxxx abides by all of the
terms herein, specifically including but not limited to Paragraphs 3, 16, 19 and 20, then the
Company shall provide Xxxxx with the following:
(a) A lump sum amount equal to eight (8) months of Xxxxx’x base salary compensation (at the
rate Xxxxx was being paid by the Company as of December 31, 2006), which shall be paid within
five business days of the “Separation Date” (i.e., February 2, 2007).
(b) A lump sum amount equal to $60,000, which shall represent a bonus and of which $35,000 has
previously been paid, such that the lump sum amount owing shall be $25,000. This lump sum shall be
paid within five business day of the end of the “Part-Time Consulting Period” (i.e., April 20,
2007).
(c) Payment of COBRA continuation coverage for Xxxxx and Xxxxx’x eligible family members
beginning February 1, 2007 and ending January 31, 2008, provided however that should Xxxxx become
re-employed with another employer and become eligible to receive group health insurance coverage
under another employer’s plan(s), Xxxxx must immediately report said coverage to the Company and
the Company’s obligations under this Paragraph 5(c) shall immediately terminate.
6. Release of Known and Unknown Claims by Xxxxx.
(a) In exchange for the agreements contained herein, Xxxxx agrees unconditionally and forever
to release and discharge the Company and its affiliated, related, parent and subsidiary
corporations, as well as their respective attorneys, agents, representatives, partners, joint
ventures, successors, assigns, insurers, employees, officers, and directors (“Company Releasees”)
from any and all claims, suits, rights, actions, complaints, demands, agreements, contracts, causes
of action, and liabilities of any kind or nature which he may now have, or ever have, whether known
or unknown, including any claims, causes of action or demands of any nature arising out of or in
any way relating to his employment with, or separation from the Company on or before the date of
the execution of this Agreement.
(b) This release specifically includes, but is not limited to, any claims for fraud; breach of
contract; breach of implied covenant of good faith and fair dealing; inducement of breach;
interference with contract; wrongful or unlawful discharge or demotion; violation of public policy;
assault and battery (sexual or otherwise); invasion of privacy; intentional or negligent infliction
of emotional distress; intentional or negligent misrepresentation; conspiracy; failure to pay
wages, benefits, vacation pay, severance pay, attorneys’ fees, or other compensation of any sort;
retaliation, discrimination or harassment on the basis of age, race, color, sex, gender, national
origin, ancestry, religion, disability, handicap, medical condition, marital status, sexual
orientation or any other protected category; any claim under Title VII of the Civil Rights Act of
1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, as
amended by the Older Workers Benefit Protection Act; the California Fair Employment and Housing
Act; Xxxxxxxx-Xxxxx, or Section 1981 of Title 42 of the United States Code; violation of COBRA;
violation of any safety and health laws, statutes or regulations; violation of ERISA; violation of
the Internal Revenue Code; or any other wrongful conduct, based upon events occurring prior to the
date of execution of this Agreement.
(c) Xxxxx acknowledges that he may hereafter discover facts different from or in addition to
those he now knows or believes to be true with respect to the claims, suits, rights, actions,
complaints, demands, agreements, contracts, causes of action, and liabilities of any nature
whatsoever
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that are the subject of the release set forth in this Agreement, and Xxxxx expressly agrees to
assume the risk of the possible discovery of additional or different facts, and agrees that this
Agreement shall be and remain effective in all respects regardless of such additional or different
facts.
(d) Xxxxx further agrees knowingly to waive the provisions and protections of Section 1542 of
the California Civil Code, which reads:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO
EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM OR HER, MUST
HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
(e) Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full
and complete release and discharge of the Company Releasees, Xxxxx expressly acknowledges that this
Agreement is intended to include and does include in its effect, without limitation, all claims
which Xxxxx does not know or suspect to exist in his favor against the Company Releasees, or any of
them, at the moment of execution hereof, and that this Agreement expressly contemplates the
extinguishment of all such claims.
(f) This release of known and unknown claims shall be construed as broadly as possible under
applicable law but shall not include any claim for indemnification under California Labor Code
Section 2802 or California Corporations Code Section 317 or any other claim the release of which
would violate California or federal statutory law or the public policy of the State of California.
(g) Nothing in this release of known or unknown claims shall be construed as prohibiting Xxxxx
from making a future claim with the Equal Employment Opportunity Commission or any similar state
agency including, but not limited to the California Department of Fair Employment and Housing
provided, however, that should Xxxxx pursue such an administrative action against the Company,
Xxxxx agrees and acknowledges that he will not seek, nor shall he be entitled to recover, any
monetary damages from any such proceeding.
7. Indemnification. Xxxxx expressly agrees to indemnify and hold the Company
Releasees, and any of them, harmless from any claim, cause of action, complaint, demand, penalty,
damage, attorney’s fees or other losses to which the Company Releasees, or any of them, are subject
to liability, arising from, related to or any in way connected with any fraudulent, tortious and/or
criminal conduct engaged in by Xxxxx at any time during his employment with the Company. As a
partial remedy hereunder, in the event Xxxxx is found by any body having jurisdiction to have
engaged in any fraudulent, tortious or criminal conduct at any time during his employment, the
Part-Time Consulting Period hereunder shall terminate with no further liability or obligations of
the Company whatsoever including no obligation by the Company to pay the sum set forth in Paragraph
5(b), above.
8. Assistance in Legal Actions. In the event the Company is or becomes involved in
any legal action relating to events which occurred or alleged to have occurred while Xxxxx was
rendering services to the Company or about which Xxxxx possesses any information, Xxxxx agrees to
assist in the preparation, prosecution or defense of any case involving the Company, including,
without limitation, executing truthful declarations or documents or providing information requested
by the Company and attending and/or testifying truthfully at deposition(s) or at trial.
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9. Knowing and Voluntary. Each party represents and agrees that the party is entering
into this Agreement knowingly and voluntarily. Each party affirms that no promise or inducement was
made to cause the party to enter into this Agreement, other than what is promised to the party in
this Agreement. Each party further confirms that the party has not relied upon any other statement
or representation by anyone other than what is in this Agreement as a basis for the party’s
agreement.
10. 21 Days to Execute The Agreement. Xxxxx expressly acknowledges that he has been
provided twenty-one (21) days to consider this Agreement and that he was informed that he had the
right to consult with counsel regarding this Agreement, and that he has had the opportunity to
consult with counsel. To the extent that Xxxxx has taken fewer than twenty-one (21) days to
consider this Agreement, Xxxxx acknowledges that he had sufficient time to consider the Agreement
and to consult with counsel and that he does not desire additional time.
11. 7 Days To Revoke The Agreement. This Agreement is revocable by Xxxxx for a
period of seven calendar days following the execution of this Agreement. The revocation must be in
writing, must specifically revoke this Agreement, and must be received by Xxxx Xxxxxx via facsimile
at (000) 000-0000, prior to the eighth calendar day following the execution of this Agreement.
This Agreement becomes effective, enforceable and irrevocable on the eighth calendar day following
Xxxxx’x execution of this Agreement.
12. Return of Property. Upon the conclusion of the Part-Time Consulting Period, Xxxxx
agrees to return to the Company all property of the Company which Xxxxx has in his custody or
control such as office equipment, forms, manuals, documents of client files, computer disks,
personnel files, or other confidential or proprietary materials of the Company provided however
that Xxxxx may retain possession of the laptop computer, docking station and printer provided to
him by the Company. By signing this Agreement, Xxxxx hereby certifies that he will not retain
possession of any of the Company’s property, including, but not limited to the original or a copy
of the materials outlined in this Paragraph, except as expressly set forth herein.
13. No Admission of Liability. This Agreement does not constitute an admission of any
kind by the Company or Xxxxx. The parties hereto desire to resolve any potential disputes in an
amicable fashion and have entered into this Agreement with the desire to forever resolve between
them those matters described in this Agreement.
14. Attorneys’ Fees. The prevailing party in any proceeding brought to enforce the
terms of this Agreement shall be entitled to recover from the other party all damages, costs and
expenses, including with limitations, attorneys’ and arbitrator’s fees, incurred as a result of
said action.
15. Modification. No amendments to this Agreement will be valid unless written and
signed by Xxxxx and the Company’s President or the President’s designee.
16. Noncompetition/Nonsolicitation/Noninterference.
(a) Xxxxx agrees that during the Modified Employment Arrangement Period and during the
Part-Time Consulting Period, without the prior written consent of the Company, he shall not,
through a corporation, partnership, limited liability company, consulting arrangement or any other
form of business entity, in any capacity, including but not limited to as an employee, officer,
director, shareholder, partner, member, owner or otherwise, in any state or territory of the United
States, engage in any of the lines of business conducted by the Company.
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(b) Xxxxx also agrees that during the Modified Employment Arrangement Period and during the
Part-Time Consulting Period and for four months thereafter, Xxxxx shall not:
(i) Directly or indirectly solicit the employment of any person who is then or has been within
the month prior to the time of such action, an employee the Company or any of its affiliates or
subsidiaries; or
(ii) Make any public statement concerning the Company, any of its affiliates or subsidiaries,
or concerning Xxxxx’x employment with or Xxxxx’x modified employment arrangement or consulting
arrangement with the Company, unless such public statement has been previously approved by the
Company, except as may be required by law; or
(iii) Induce, attempt to induce or knowingly encourage any Customer, supplier, vendor,
contractor, or sales agent of the Company or any of its affiliates or subsidiaries to divert any
business or income from the Company or any of its affiliates or subsidiaries or to stop or alter
the manner in which the Customer, supplier, vendor, contractor, or sales agent is or are then doing
business with the Company or any of its affiliates or subsidiaries. The term “Customer” shall mean
any individual or business that was or is a customer or client of, or one that was or is a party in
a selling agreement with, or whose business was actively solicited by, the Company or any of its
affiliates or subsidiaries at any time, regardless of whether such customer was generated, in whole
or in part, by Xxxxx’x efforts.
(c) Each party hereto acknowledges that the potential restrictions on Xxxxx’x future
activities imposed by the covenants in Paragraph 16 are reasonable in both duration and scope and
in all other respects. In the event that the provisions of Paragraph 16 should ever be deemed to
exceed the duration or scope permitted by applicable law, then such provisions shall be reformed to
the maximum time, scope or other limitation, as the case may be, permitted by applicable law, and
each party agrees that the restrictions and prohibitions contained herein shall be effective to the
fullest extent allowed under applicable law in such jurisdiction.
(d) Xxxxx understands and agrees that the consideration he is receiving in connection with
this agreement is adequate consideration to support the covenants set forth in this Agreement.
Xxxxx further understands and agrees that this Paragraph 16 is a material term of this Agreement.
17. Specific Performance. Xxxxx acknowledges that in the event of breach or
threatened breach by Xxxxx of the terms of Paragraph 16 hereof, the Company could suffer
significant and irreparable harm that could not be satisfactorily compensated in monetary terms,
and that the remedies at law available to the Company may otherwise be inadequate and the Company
shall be entitled, in addition to any other remedies to which it may be entitled to under law or in
equity, to specific performance of this Agreement by Xxxxx including the immediate ex parte
issuance, without bond, of a temporary restraining order enjoining Xxxxx from any such violation or
threatened violation of this Agreement and to exercise such remedies cumulatively or in conjunction
with all other rights and remedies provided by law and not otherwise limited by this Agreement.
Xxxxx hereby acknowledges and agrees that the Company shall not be required to post bond as a
condition to obtaining or exercising any such remedies, and Xxxxx hereby waives any such
requirement or condition. Xxxxx also specifically acknowledges that the issuance of a temporary
restraining order may be requested by the Company through the dispute resolution procedure set
forth in Paragraph 26, below.
18. Entire Agreement/Integration. This Agreement, the Option Agreement, the
Confidentiality Agreement, and the ongoing obligations of the Severance Agreement discussed above,
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constitute the entire agreement between Xxxxx and the Company concerning the terms of Xxxxx’x
employment with and separation from the Company and the compensation related thereto, and this
Agreement constitutes the entire agreement between Xxxxx and the Company concerning the terms and
conditions of Xxxxx’x consulting arrangement with the Company. All prior discussions and
negotiations have been and are merged and integrated into, and are superseded by, this Agreement
and those agreements referenced herein. The parties to this Agreement each acknowledge that no
representations, inducements, promises, agreements or warranties, oral or otherwise, have been made
by them, or anyone acting on their behalf, which are not embodied in this Agreement, the Option
Agreement, as amended hereby, and the Confidentiality Agreement, and that they have not executed
this Agreement in reliance on any such representation, inducement, promise, agreement or warranty.
19. Non-Disparagement. Xxxxx agrees that he will not disparage or otherwise make
negative remarks to any person or entity regarding (a) the Company, (b) the Company’s owners,
agents, representatives, attorneys, accountants, employees, officers or directors, or (c) the
Company’s current or potential products, services, plans, strategies, operations, business or
financial condition. Xxxxx understands and agrees that this Paragraph is a material term of this
Agreement.
20. Confidentiality. Xxxxx expressly agrees to hold in strict confidence and not to
disclose, either directly or indirectly, to anyone other than Xxxxx’x attorney anything regarding
the status of the Company’s search for a new Chief Financial Officer. Xxxxx understands and agrees
that this Paragraph is a material term of this Agreement.
21. No Assignment. Xxxxx represents and warrants that he has made no assignment, and
will make no assignment, of any claim, right of action or any right of any kind whatsoever,
embodied in any of the claims released herein, and that no other person or entity of any kind had
or has any interest in any of the claims, demands, obligations, actions, causes of action, debts,
liabilities, rights, contracts, damages, attorneys’ fees, costs, expenses or losses released
herein.
22. No Waiver. Failure to insist on compliance with any term, covenant or condition
contained in this Agreement shall not be deemed a waiver of that term, covenant or condition, nor
shall any waiver or relinquishment of any right contained in this Agreement at any one time or more
times be deemed a waiver or relinquishment of any right at any other time or times.
23. Successors and Assigns. This Agreement may not be assigned by the Executive, but
may be assigned by the Company to any successor to its business and will inure to the benefit of
and be binding upon any such successor.
24. Severability. Should any portion, word, clause, phrase, sentence or paragraph of
this Agreement be declared void of unenforceable, such portion may be considered and independent
and severable from the remainder, the validity of which shall remain unaffected.
25. Representations and Warranties. Both parties to this Agreement represent and
warrant that this Agreement in all respects has been voluntarily and knowingly executed by them
after having received independent legal advice, if they desired, from attorneys of their choice.
Both parties also represent and warrant that they have carefully read this Agreement and the
contents hereof are known and understood by them.
26. Choice of Law. This Agreement has been negotiated and executed in the State of
California and shall in all respects be interpreted, enforced and governed in accordance with the
laws of California. After execution of this Agreement, any dispute regarding enforcement or breach
of this
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Agreement, or any aspect of Xxxxx’x employment with the Company or the cessation of such
employment, or the consulting arrangement set forth herein, will be submitted to final and binding
arbitration pursuant to the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association (“AAA”) in Los Angeles County, California, as the exclusive remedy
for such claim or dispute. In any such arbitration, discovery may be conducted pursuant to
applicable California law. The arbitrator shall issue a written opinion and shall have full
authority to award all remedies which would be available in court. Judgment upon the award
rendered by the AAA arbitrator may be entered in any court having jurisdiction thereof.
27. Publicity. To the extent the Company issues a press release regarding the
termination of Xxxxx’x employment, it shall provide a copy of such press release to Xxxxx prior to
its release.
28. Joint Preparation. The parties acknowledge that this Agreement was jointly
prepared by them, by and through their respective legal counsel, and any uncertainty or ambiguity
existing herein shall not be interpreted against any of the parties, but otherwise according to the
application of the rules on interpretation of contracts.
* * *
PLEASE READ CAREFULLY. THIS AGREEMENT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
THE UNDERSIGNED AGREE TO THE TERMS OF THIS AGREEMENT AND VOLUNTARILY ENTER INTO IT WITH THE INTENT
TO BE BOUND THEREBY.
| Date: January 4, 2007 | /s/ Xxxxxxxx X. Xxxxx | |||
| Xxxxxxxx X. Xxxxx | ||||
| Date: January 5, 2007 | XXXX INDUSTRIES INC. |
|||
| By: | /s/ Xxxx Xxxxxxx | |||
| Name: | Xxxx Xxxxxxx | |||
| Title: | Chief Executive Officer | |||
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