CONFIDENTIAL
MANAGEMENT SUCCESSION AND SEPARATION AGREEMENT
This Management Succession and Separation Agreement ("Agreement") is made
as of February 26, 1998, by and between Xxxxxxx X. Xxxxxxxxx (the "Executive")
and Xxxxx'x Fashions Corporation (the "Company").
WHEREAS, the Executive is currently Vice Chairman, Chief Financial Officer
and Chief Administrative Officer and a director of the Company, and
WHEREAS, the Executive and the Company, through its wholly owned
subsidiary, Xxxxxx Fashions, Inc., are parties to an Executive Employment
Agreement dated as of December 19, 1991 ("Employment Agreement"), and
WHEREAS, the Company, with the cooperation of the Executive, is preparing
for an orderly management succession plan, and
WHEREAS, in furtherance of the succession plan, the Company has agreed,
among other things, to pay the Executive (i) for his services during a
transitional period to assist in the succession strategy and (ii) a lump sum
severance payment for the full and complete satisfaction of all of the
Company's obligations under the Employment Agreement.
NOW THEREFORE, the parties hereto agree and promise as follows:
1. The Executive shall serve as the Company's Vice Chairman for an
interim period (the "Interim Period") commencing on the date of this Agreement
and ending on June 30, 1998 (the "Separation Date"). During the Interim Period,
the Executive shall continue to serve as the Company's Vice Chairman, at a
salary equivalent to his current salary, payable at those intervals that the
Executive is currently paid and continue to report to the Board of Directors.
The Executive shall devote full time to the Company's business and affairs
during the Interim Period including assisting the Company's successor Chief
Financial Officer. The Executive shall be considered an employee and shall be
eligible for such fringe benefits as the Executive currently receives during the
Interim Period, including but not limited to, a car allowance of $1000 per
month, vacation, life insurance and medical and disability benefits
(collectively, the "Fringe Benefits") during the Interim Period. The Executive
shall be eligible to receive a bonus in accordance with the Company's fiscal
1998 Bonus Plan but shall thereafter not be eligible for any bonuses under the
Company's bonus or incentive plans, now existing or hereafter established, nor
be eligible for any stock option grants under the Company's 1997 Stock Option
Plan. Any accounting costs which the Company may incur as a result of any
management succession or separation agreements for the fiscal year ending
February 28, 1998
shall be considered extraordinary nonrecurring costs and excluded from the
calculation required for computing bonuses to the Executive under the fiscal
1998 Bonus Plan.
2. In further consideration for the full and complete discharge of all of
the Company's obligations to the Executive under the Employment Agreement, the
Company agrees to the following:
(a) On the Separation Date, the Company shall in one installment pay
the Executive $210,000. This payment shall be reported to the IRS on a
Form 1099.
(b) All of the Executive's unvested stock options to acquire common
stock of the Company granted to the Executive on June 24, 1996 under the
Company's 1987 Stock Option Plan (73,000 options in the aggregate) as well
as the stock option to acquire 10,000 shares of common stock granted to
Executive on July 17, 1997 at an exercise price of $8.75 per share shall
vest on the date of this Agreement and the Executive shall have three (3)
months from the Separation Date in which to exercise such stock options;
after which time such stock options (the 83,000 collective options are
hereafter referred to as the "Shares") shall terminate.
(c) At such time as the Executive exercises the options in paragraph
2(b), the Company shall provide the Executive with a loan in the principal
amount of up to $200,000 (the "Note"), the proceeds of which are to be used
to assist the Executive in paying the exercise price for the Shares under
paragraph 2(b). Providing the Executive with the Note is subject to, and
contingent upon, approval from the Company's lender. The Note shall have a
term of three years and bear interest at a rate of 7% per annum, payable
semiannually in arrears. The Note shall contain a mandatory prepayment
provision which provides that if the Executive sells any of the Shares
during the term of the Note, thirty-five percent (35%) of the gross
proceeds from such sale, net of commissions, shall be applied to the then
outstanding obligations under the Note.
(d) The Executive shall continue to receive the Fringe Benefits for
twelve (12) months commencing on the Separation Date.
(e) The Executive shall be entitled to receive for unrestricted
expenses incurred with respect to outplacement $1,000 per month commencing
on the Separation Date and continuing until the earlier of the Executive
accepting new employment or 12 months from the Separation Date.
(f) After the Separation Date, the Executive and the Executive's
spouse shall be entitled to continue to be covered by the Company's group
health insurance coverage subject to the terms of such policy as presently
maintained, or as maintained in the future, as a member of the group, the
cost of which shall be paid by the Company, which coverage shall be
continued until the earlier of five (5) years from the Separation Date or
the Executive's satisfying the age qualifications to be eligible for
Medicare. The coverage for Executive's
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spouse shall terminate also at the earlier of five (5) years from the
Separation Date or the Executive's satisfying the age qualifications to be
eligible for Medicare or the death of the Executive. To the extent the
Executive receives coverage for Medicare with another company during the
five (5) years, the benefits under the foregoing two sentences shall
terminate.
(g) At the end of twelve months from the Separation Date, the Company
shall assign the Executive's $500,000 life insurance policy at no cost to
the Executive. Any cash surrender value which accrues under such policy
shall be for the benefit of the Executive.
(h) The Company shall, for a six-month period commencing on June 30,
1998, pay the Executive an aggregate of $30,000, payable in monthly
installments, in connection with providing consulting services by
telephone, including assisting the successor Chief Financial Officer
during this transitional period and the Executive agrees to provide the
foregoing services.
(i) The Company will reimburse the Executive up to $2,500 for legal
services rendered to Executive by his personal counsel in connection with this
Agreement.
3. In consideration for the payments and benefits provided to the
Executive in paragraphs 1 and 2 above, the Executive acknowledges that the
Company has fulfilled its obligations in full under the Employment Agreement.
The Executive further agrees to formally resign and relinquish his
positions as Chief Financial Officer and Chief Administrative Officer of the
Company and Xxxxx'x Fashions, Inc. as of the date of this Agreement and as Vice
Chairman and a director of the Company and Xxxxx'x Fashions, Inc. as of the
Separation Date. The parties shall mutually prepare and approve the press
release announcing the foregoing resignations.
4. The Executive shall not disclose the terms of this Agreement to anyone
other than his immediate family and any accounting and legal advisors solely for
the purposes of obtaining advice about the agreements with the Company
hereunder.
5. Upon execution of this Agreement by both parties, the Executive and
his successors and assigns and the Company and its directors, officers,
employees, agents and insurers and their respective successors and assigns,
covenant not to xxx each other and release and forever discharge each other from
any and all causes of action, claims, suits and demands, whether known or
unknown, for or by reason of any transaction, cause, matter or thing whatsoever
up to the date hereof, including but not limited to, all claims of breach of
contract, wrongful discharge and promissory estoppel, all claims for payment of
deferred compensation, and all claims of discrimination based on religion,
national origin, age (including the Age Discrimination in Employment Act of
1976, 29 U.S.C. Section 621), disability, sexual preference, marital status and
retaliation and all claims based upon any federal, state or municipal statute or
ordinance relating to discrimination in employment. The foregoing release
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and covenant not to xxx is not intended to release either party from its
obligations under this Agreement and either party may have a cause of action
against the other for any breach of this Agreement.
6. The Executive shall have fifteen (15) calendar days from the date of
this Agreement to rescind this Agreement in its entirety. If the Executive
wishes to rescind this Agreement, he must do so in writing and must deliver a
Notice of Rescission, if by hand, within fifteen (15) calendar days after the
Agreement is executed or, if mailed, by having the Notice of Rescission
postmarked within fifteen (15) calendar days after the Agreement is executed and
sent by certified mail, return receipt requested. Notice of Rescission must be
sent to Xxxxx'x Fashions Corporation, 0000 Xxxxxx Xxxx Xxxxx, Xxxxxxxx,
Xxxxxxxxx 00000, attention: Xxxxxxx Xxxxxx.
7. The Executive also acknowledges that he has at least twenty-one (21)
days in which to consider whether to enter into this Agreement, although he is
free to execute this Agreement at any time before the twenty-one (21) day period
has expired.
8. Both parties have read the terms and provisions of this Agreement and
understand them.
9. This Agreement shall inure to the benefit of the Executive, his heirs,
administrators, representatives, executors, successors and assigns.
10. This Agreement supersedes and replaces the Employment Agreement which
hereafter has no further force or effect.
11. In consideration for the benefits and payments provided to the
Executive under this Agreement, the Executive agrees that:
(a) for a period of one (1) year after the Separation Date, the
Executive will not in any way, directly or indirectly, engage or invest in,
own, manage, operate, control, or participate in the ownership, management,
operation or control of, be employed by, associated with, or in any manner
connected with or render services or advice to, any women's retail business
headquartered or having significant business operations in Minnesota.
(b) for a period of two (2) years after the Separation Date:
(i) the Executive will not, directly or indirectly, either for
himself or any other person, (1) induce or attempt to induce any
employee of the Company to leave the employ of the Company, (2) in any
way interfere with the relationship between the Company and any
employee of the Company, or (3) induce or attempt to induce any
vendor, supplier, landlord or business relation of the Company to
cease doing business
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with the Company or in any way interfere with the Company's
relationships with vendors, suppliers, landlords or other business
relations;
(ii) the Executive will not, directly or indirectly, either for
himself or any other person, solicit the business of any vendor or
supplier with which the Company presently imports merchandise or
provide the identity of any vendor or supplier as identified on
Exhibit A attached hereto;
(iii) the Executive will not, directly or indirectly, either for
himself or any other person, negotiate or otherwise be involved in any
way with respect to the real estate locations presently contemplated
by the Company in connection with its expansion as identified on
Exhibit A attached hereto.
The Executive agrees that the foregoing covenants in this paragraph 11 are
reasonable with respect to duration, geographical area and scope.
12. (a) The Executive will not divulge to others or use for the
Executive's own benefit any confidential information obtained during the
Executive's employment relating to the Company's business and operations or
its affiliates involving strategy, customer lists, lists of prospective
customers, potential store locations, employee lists, number and location
of sales representatives, new and existing programs and services, prices
and terms, and any other proprietary information as may exist or be
developed from time to time.
The Executive will not divulge "Trade Secrets" as that term is defined
in Minnesota Statutes Chapter 325.C.
(b) Upon termination of employment services, the Executive will
return to the Company all documents, copies, papers, printouts, diskettes,
or other media which contain any such proprietary, confidential, or trade
secret information.
13. This Agreement constitutes the entire agreement between the parties
regarding the subject matter hereof and no agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
No provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by the
parties. Failure by either party to enforce any provision of this Agreement
shall not constitute a waiver of such party's rights to subsequently enforce
such provision or any other provision of this Agreement, unless such rights are
waived in writing. No waiver by either party hereto at any time of any breach
by the other party to this Agreement or of any condition or provision of this
Agreement, shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or similar time. In the event of any
conflict between this Agreement and any other agreement entered into by and
between the Company and the Executive, this Agreement shall control. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of
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any other provision of this Agreement, which shall remain in full force and
effect. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate originals as of the date first stated above.
/s/ Xxxxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxxxx
XXXXX'X FASHIONS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Its: President and CEO
-------------------------
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EXHIBIT A
FOREIGN VENDORS
1. Pressfield, Hong Kong
2. Tun-Tex, Xxxx Xxxx
3. D-Chow, Singapore
APPLICABLE XXXXX'X LOCATIONS WITHIN FOLLOWING MALLS
MALL CITY
---- ----
Xxxxx Xxxxx, Kansas
Chapel Hill Akron, Ohio
Northtown Mall Spokane, Washington
Westroads Omaha, Nebraska
White Oaks Springfield, Illinois
Wahpeton Wahpeton, North Dakota
Williston Williston, North Dakota
Tri-County Cincinnati, Ohio
Xxxxxxxx Mall Kokomo, Indiana
Mounds Mall Anderson, Indiana
Richmond Square Richmond, Indiana
Twin Peaks Longmount, Colorado
Provo Provo, Utah
Xxxxxxxx Xxxxxxx, Xxxxxxxx
Xxxxxxxx Xxxxxxxx, Xxxx
