Exhibit 10.7
SEPARATION AND GENERAL RELEASE AGREEMENT
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The Parties to this Separation and General Release Agreement ("Agreement")
are Xxxxxxxxxx X. Xxxxxxx ("Executive") and Crown Vantage, Inc. ("the Company").
AGREEMENTS
1. Effective September 1, 1999, ("Effective Date") Executive's employment with
the Company will terminate as a result of the Company's executive office
relocation to Cincinnati, Ohio and Executive's decision not to relocate. This
also acknowledges the Executive's resignation from any and all officerships and
directorships of Crown Vantage Inc. and any of its affiliates as of the date of
severance. At the time of termination, Executive will receive all accrued
salary and all unused vacation pay. Separate and apart from these payments, and
as consideration to support this Agreement, Executive shall receive the
following additional Separation Benefits following execution of this Agreement:
(a) Additional Separation Pay. Fifty-two (52) weeks of base salary
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continuation, excluding bonus eligibility or entitlement, at Executive's
final base salary rate less required deductions and withholdings.
(b) Additional Health, Dental, and Life Insurance Coverage. Company-paid
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premiums for continued health, dental, employee life, and group life
insurance coverage for Executive and Executive's covered dependents at the
same rate and to the same extent Executive and his or her dependents are
covered by such plans on the Effective Date for the fifty-two (52) weeks of
Executive's salary continuation period, provided however that such coverage
will cease if the Executive becomes reemployed with another employer and is
eligible to receive health, dental of life insurance under an employer-
provided plan, or if Executive and Executive's dependents cease being
eligible for COBRA-continuation coverage under the Company's plans for any
other reason.
(c) Company-Provided Automobile. On the Effective Date, the Company will
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cease providing Executive with an automobile at Company expense. However,
at the Executive's option, Executive may either assume the lease obligation
on the same terms and at the same rate as the Company was leasing the
automobile on the Effective Date, or may purchase the automobile on the
same terms and at the same rate as if the lease had expired.
(d) Restricted Stock. All Restricted Stock in effect on the Effective
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Date shall become immediately vested.
(e) Stock Options. All Stock Options in effect on the Effective Date
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shall become immediately vested in accordance with the terms of the Stock
Option Plan provided that such options must be exercised within 3 months of
the Effective Date during which time there shall be no further vesting.
2. As partial consideration for the promises contained in this Agreement,
Executive hereby waives, releases, and discharges the Company and its
affiliates, parents and subsidiaries, and its or their current or former
officers, board members, employees, attorneys, and/or agents from any
complaints, claims, charges, claims for relief, demands, suits, actions and/or
causes of action which Executive asserts, has asserted or could assert arising
from or in any way connected with Executive's employment relationship with the
Company and/or the termination of that employment. This includes, but is not
limited to, any "wrongful discharge" claims; all claims relating to any contract
of employment (express or implied); any covenant of good faith and fair dealing
(express or implied); any and all tort claims; any claims brought under any
federal, state, or municipal law, regulation or ordinance; any claims under
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act, the Older Workers' Benefit Protection Act, the
Worker Adjustment and Retraining Notification Act, the Employee Retirement
Income Security Act, the Americans with Disabilities Act, the California Fair
Employment and Housing Act, any labor and civil codes of the State of California
or any other state, and any and all claims for attorney fees and costs. This
waiver and release is intended to be full and complete, except for those
obligations that are created by this Agreement.
3. As further consideration for this Agreement, Executive hereby waives and
releases any and all rights under section 1542 of the California Civil Code.
California Civil Code section 1542 reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Executive agrees that this Agreement shall extend and apply to all unknown,
unsuspected and unanticipated injuries and damages as well as those of which
Executive is now aware, which arose before the signing of this Agreement.
4. As further consideration for this Agreement, the Parties agree that the
"Change of Control" Agreement entered into between Executive and the Company on
December 5, 1995 will be, and hereby is, made null and void.
5. If a Change of Control (as defined in Section 6 below) occurs during
Executive's fifty-two week salary continuation period, Executive, in addition to
the Separation Benefits defined in Section 1 of this Agreement, will receive the
following benefits:
(a) The sum of $456,850, and
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(b) For the Continuation Period (as defined below), Executive will again
be eligible for Company-paid health, dental, employee life, and group life
insurance benefits for Executive and Executive's dependents as and to the
extent those coverages were in effect on the Effective Date, or, if more
favorable to Executive, as are in effect generally immediately before the
Change of Control Date with respect to other peer executives of the Company
and their families, provided, however, that if Executive has become or
becomes reemployed with another employer and is eligible to receive health,
dental, or life insurance benefits under another employer-provided plan,
the life insurance benefits shall cease and the health and dental insurance
benefits shall be secondary to those provided under such other plan during
such applicable period of eligibility, and provided further that Executive
and Executive's dependents otherwise are and remain eligible for coverage
under the federal law COBRA. The Continuation Period shall be three years.
For purposes of determining eligibility (but not the time of commencement
of benefits) of Executive for retiree benefits pursuant to such insurance
plans, Executive shall be considered to have remained employed for three
years after the Change of Control Date and to have retired on the last date
of such period.
6. For the purpose of this Agreement, a Change of Control shall mean:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(a)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or
more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition by the Company, (ii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iii) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii), and (iii) of subsection (c) of this Section 6; or
(b) Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors of other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
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(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company
and its subsidiaries (a "Business Combination"), in each case, unless
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 35% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business Combination
and (iii) at least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were members of
the Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company and its subsidiaries.
7. (a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments
required under this Section 7 (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes) , including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of
this Section 7(a), if it shall be
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determined that the Executive is entitled to a Gross-Up Payment, but that
the Executive, after taking into account the Payments and the Gross-Up
Payment, would not receive a net after-tax benefit of at least $25,000
(taking into account both income taxes and any Excise Tax) as compared to
the net after-tax proceeds to the Executive resulting from an elimination
of the Gross-Up Payment and a reduction of the Payments, in the aggregate,
to an amount (the "Reduced Amount") such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
the Executive and the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
(b) Subject to the provisions of Section 7(c), all determinations required
to be made under this Section 7, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by Ernst & Young, L.L.P., or such other certified public accounting firm as
may be designated by the Executive (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving
as accountant or auditor for the individual, entity or group effecting the
Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 7, shall be paid by the Company to the Executive within five
days of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to Section 7(c) and
the Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company
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notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 7(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and xxx for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes for
the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder
and the Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 7(a) or 7(c), the Executive becomes entitled to
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receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 7(c)) promptly
pay to the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 7(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
8. Executive represents that Executive does not have any lawsuits, charges,
administrative proceedings or any other action currently on file, lodged or
pending against the Company or its affiliates, parents, or subsidiaries or any
of its or their current or former officers, board members, employees, attorneys,
and/or agents, and further agrees that Executive will not file any lawsuit or
administrative charge or complaint against the Company or its affiliates,
parents, or subsidiaries or any of its or their current or former officers,
employees, board members, attorneys, and/or agents for actions occurring before
the execution of this Agreement. Executive shall cooperate with the Company in
the defense of any action brought against the Company or any agent of the
Company that relates in any way to Executive's acts or omissions or
responsibilities while employed by the Company. Notwithstanding any contrary
provision in this Agreement, to the extent and in accordance with that which is
permitted by the By-laws of the Company, the Company shall indemnify and hold
Executive harmless for any and all costs, liabilities, or obligations, including
attorneys fees, which Executive may incur as a result of litigation brought by
any third party against the Company and/or Executive.
9. The Parties understand and agree that this Agreement shall bind and benefit
their heirs, employees, officers, board members, agents, attorneys,
representatives, successors, predecessors and assigns.
10. Executive affirms and acknowledges that Executive has read and understands
this Agreement, that Executive may have at least 45 days to consider this
Agreement (although Executive may voluntarily elect to waive any of this
consideration period), and that Executive is hereby advised to consult with an
attorney regarding the terms of this Agreement. Executive accepts this
Agreement freely and voluntarily and with full knowledge of its effect.
11. This Agreement shall not become effective until 7 days after Executive has
signed this Agreement. This 7-day revocation period cannot be waived. In order
to be effective, a notice of revocation must be received by the Company before
expiration of the 7-day revocation period. Such notice shall be directed to:
Xx. Xxxxxx X. Xxxx, President and CEO
Crown Vantage, Inc.
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0000 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
12. Executive acknowledges that, as of the Effective Date, she hereby resigns
all officerships and directorships of Crown Vantage Inc. and/or any of its
affiliates.
13. This Agreement constitutes the complete understanding between the Parties
and supersedes all prior or contemporaneous written or oral agreements between
the parties concerning its subject matter. Any modification of this Agreement
will be effective only if it is in writing and signed by the Parties to this
Agreement. If any provision of this Agreement is held invalid or unenforceable,
the remaining provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way.
14. Any and all disputes concerning this Agreement shall be resolved by binding
arbitration according to the Employment Dispute Resolution rules and procedures
of the American Arbitration Association. California substantive law shall
apply, and the Agreement shall be interpreted as though it were mutually drafted
by both Parties.
15. The Parties indicate their knowing and voluntary acceptance of this
Agreement by their signatures below.
Dated: August ____, 1999 ____________________________________
Executive's Signature
Executive's Mailing Address:
____________________________________
____________________________________
____________________________________
CROWN VANTAGE, INC.
Dated: August ____, 1999 By _______________________________
Xxxxxx X. Xxxx, President & CEO
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