Exhibit 12
December 11, 1998
Xxxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Dear Xxx:
This letter will confirm our understanding that you will be retiring from your
position as Controller of Fingerhut Corporation, Inc. (the "Company") effective
March 31, 1999. ("Resignation Date"). The Company is prepared to offer you
certain benefits in exchange for your execution of this Separation Agreement and
General Release ("Agreement"). The terms of the Company' separation offer to you
are outlined below.
AGREEMENTS AND UNDERSTANDINGS:
1. RETIREMENT. You hereby agree to retire from your position as
Controller effective March 31, 1999. You agree and understand that effective
March 31, 1999, you will no longer be an employee of the Company and your
consulting arrangement, which will begin on April 1, 1999, will be governed by
the terms set forth below.
You acknowledge that all benefits and privileges of employment with the
Company end as of the close of business on March 31, 1999 except for those
payments and benefits described in this Agreement, (provided that you do not
rescind this Agreement in accordance with Section 11) and those to which you are
otherwise entitled by operation of law.
2. CONSULTING SERVICES. Upon retirement from your employment, you will
begin providing consulting services to the Company. Provided that you do not
rescind this Agreement in accordance with Section 11 of this Agreement and you
satisfy the terms of your consulting agreement, you will continue as a
consultant until March 31, 2000 and the Company will continue to compensate you
at your current base rate of compensation of $121,590.56. Your compensation will
be paid bi-weekly in accordance with the Company's normal payroll periods.
The Company will issue a Form 1099 for these amounts.
As a consultant, you will report to Xxxxxxx Xxxxxxx and Xxxx Xxxxxxx
and you will be available to spend 10 hours per month providing consulting
services on the Xxxxxx litigation, any other current or potential litigation
exposure and financial matters.
You agree to make yourself available upon reasonable notice to discuss with the
Company and its counsel issues related to the Xxxxxx litigation, any other
litigation or potential litigation exposure and any financial matters. You also
agree to appear without subpoena for deposition or testimony and to meet with
the Company's (not plaintiffs') attorneys for deposition preparation and trial
preparation. You agree to be available in excess of the 10 hours per month
should you be deposed in the Xxxxxx litigation or if the case goes to trial. The
Company agrees that, when its requests require travel, it will pay your
reasonable expenses, including all "out of pocket" expenses, consistent with the
Company' policy governing reimbursement.
It is expressly understood and agreed that you will be an independent
contractor and not an employee of the Company with respect to this consulting
arrangement. You shall be responsible for paying any and all payroll and income
taxes of any nature whatsoever, including, without limitation, FICA and/or
self-employment taxes, imposed upon the compensation paid to you as a
consultant.
In the event that you breach any provision of this Agreement, your
services as a consultant will terminate upon 30 days notice of termination by
the Company to you. The Company also can terminate the consulting arrangement
based upon your failure to provide the services described in this Section. In
the event of such termination prior to March 31, 2000 (whether by you or the
Company), you understand and agree that the Company will have no further
obligations under this Section 2.
3. BENEFITS OF SEPARATION AGREEMENT.
(a) Except as otherwise provided herein, you will not be eligible to
receive any additional contribution under the Fingerhut Companies,
Inc. Stock Option Plan, the 1995 Long-Term Incentive and Stock
Option Plan, the Key Management Incentive Bonus Plan, the Fingerhut
Corporation Profit Sharing and 401(K) Savings Plan or any other plan
(excluding your rights to benefits under the medical, dental and
vision plans, life insurance and disability insurance and the
Fingerhut Corporation Pension Plan. Your rights in these plans are
described in your Separation Related Benefits and Insurance
Information)
(b) 1998 Profit Sharing Contribution
Your profit-sharing contribution for fiscal year 1998 will be
calculated and paid contemporaneously with awards made to other
participants in the plan. This Agreement does not create any
independent right to receive an award under the Fingerhut
Corporation Profit Sharing and 401(K) Savings Plan.
(c) Pro-Rated Payment in Lieu of 1999 Profit Sharing Contribution
Page 2
You will receive a pro-rated payment in lieu of your
profit-sharing payment for 1999. This payment will be paid at a
level of 10% of the compensation paid or owed for consulting
services as of your termination date of March 31, 1999 or a total of
$3,180. This payment will be made on or around April 15, 1999 and
will be calculated exclusive of any Key Management Incentive Bonus
payments received in 1999.
(d) 1998 Key Management Incentive Bonus
Your Key Management Incentive Bonus for fiscal year 1998 will
be calculated and paid contemporaneously with awards made to other
participants in the Plan. This Agreement does not create any
independent right to receive an award under the Key Management
Incentive Bonus Plan.
(e) Pro-Rated Payment in Lieu of Key Management Incentive Bonus
You will receive a pro-rated payment in lieu of your 1999 Key
Management Incentive Bonus, which will be in the amount of $10,812.
This payment will be calculated based upon your termination date of
March 31, 1999 and will be made on or around April 15, 1999. A copy
of the KMIB calculation will be provided to you.
(f) Effective as of March 31, 1999, you will be paid for unused
accrued vacation, if any, in accordance with the agreement you
reached with Xxxx Xxxxxxx (which is incorporated herein by
reference) and in accordance with Company policy. You will be
permitted to take one week of vacation during February of 1999 in
order to use an additional week of vacation which will accrue in
January of 1999.
(g) You acknowledge and agree that all items of remuneration and/or
benefits, not specifically mentioned in Sections (a) through (f)
above, including, but not limited to bonuses and incentive pay have
been resolved and included in the payment referenced in Section 2
and you have no additional claim to any other items of remuneration
or benefit, except those benefits included in the Company's
retirement policy which are applicable to you, including but not
limited to medical insurance and pension benefits.
Page 3
4. STOCK OPTIONS.
(a) Effective as of your Termination Date, your participation in the
Fingerhut Companies, Inc. 1995 Long-Term Incentive and Stock Option
Plan (the "1995 Plan") will cease. Based on the terms of the 1995
Plan and the stock options granted to you on July 28, 1997, before
the expiration of ninety (90) days after your Termination Date you
will be able to exercise your vested option to purchase 5,586 shares
at the price of $7.1086 per share; this option shall terminate and
may no longer be exercised on the 91st day following your
Termination Date.
(b) Other than those options specifically set forth above, all
unvested options that you have will expire and be of no further
legal effect on March 31, 1999.
(c) You shall not have any rights as a shareholder of the Company
with respect to the options referred to in this Section until you
pay the full consideration for the shares covered by such options,
and a stock certificate evidencing such shares shall be issued to
you.
(d) The options referred to in this Section 4 shall not be
transferable (notwithstanding the terms and provisions set forth in
the Plan), and shall not be pledged or hypothecated in any way or
subject to execution, attachment or similar process.
5. NON-DISCLOSURE. You acknowledge that in the course of employment
with the Company, you have had access to confidential information and trade
secrets relating to the business affairs of the Company and/or related companies
and entities and that through March 31, 2000, you will continue to have access
to confidential information and trade secrets relating to the business affairs
of the Company and/or related companies and entities. You agree that you are
obligated to not, at any time, without the prior written consent of the
Company's General Counsel, disclose or otherwise make available to any person,
company or other party confidential information or trade secrets.
Page 4
For the purposes of this Section 5 (Non-Disclosure), the terms
Confidential Information shall mean all Company information: (1) which has been
designated by the Company as confidential and is protected by the Company as
such; (2) which is known only to you or others in a confidential relationship
with the Company or any subsidiary or affiliate thereof; (3) which is related to
matters such as trade secrets, customer or mailing lists, pricing or credit
techniques, research or development activities, suppliers, books or records or
private processes of the Company or any subsidiary or affiliate of the Company;
or (4) which is not known to others, readily available to others from sources
other than you; provided, however, that the foregoing shall not prevent you from
using your learned skills, know-how or business experience to pursue a
livelihood.
Any company business documents that have come into your possession as
an employee of the Company will be subject to the Non-Disclosure provision of
this Section and will remain with the Company with the exception of your
performance reviews, PCR's, KMIB assessments and calculations, stock option
summaries, SEC Form 4's, and any other documents pertinent to your own employee
development or benefits.
You will be given a copy of the Fingerhut Companies, Inc. Directors and
Officers Liability Insurance binder.
You acknowledge your continuing agreement to abide by the terms of the
Standards of Ethical Conduct, including the Confidentiality Agreement you
executed. The covenants and undertakings of this Section 5 will survive the
termination of this Agreement.
You also agree that during your employment and until the conclusion of
your consulting arrangement, if you are contacted and asked to cooperate and
assist any individual who is pursuing or considering whether to pursue any
claims, demands, charges, suits or causes of action of any kind against the
Company, you will notify the Company's General Counsel.
6. NON-SOLICITATION. You further agree that you will not, for a period
of one (1) year following the termination of your employment with the Company
for whatever reason, on your behalf or on behalf of any person or entity,
directly or indirectly, solicit, place or recruit (1) any employee who has been
employed by the Company or any affiliate of the Company at any time during the
one (1) year immediately preceding such solicitation, and (2) any person or
entity who or which is a client or customer of the Company or any Company
affiliate or any supplier, lender, lessor any other person or entity which has a
business relationship with the Company or any Company affiliate, in order to
influence or induce such employee, client or customer to terminate or lessen by
50% his, her or its relationship with the Company or any Company affiliate, or
to develop relationships with you or any other person which would have the same
effect.
The restrictions in this Section 6, will apply regardless of whether
you act directly, indirectly or whether you act personally or as an executive,
agent, partner,
Page 5
consultant or otherwise. However, this does not prohibit fair
competition without the intent to solicit, place, recruit, influence or induce.
7. CONFIDENTIALITY AND NON-DISPARAGEMENT. You agree to keep the terms
and conditions under which this Agreement has been reached, including the terms
and conditions of this Agreement, forever confidential. This means you will not
disclose the terms and conditions of this Agreement, or the facts and
circumstances leading up to this Agreement to any individual or entity, except
your spouse, your attorneys, accountants, tax consultants, state and federal tax
authorities, as may be required by law or to enable you to pursue your legal
rights as a shareholder in the Company or in your legal defense as it relates to
duties undertaken as an officer of the Company. You agree to advise your spouse,
attorneys, accountants and tax consultants about the confidentiality of this
Agreement. If compelled by the judicial process to disclose any terms of this
Agreement, you agree to notify the Company before the information is revealed,
of the information you wish to reveal, the reason therefore and the identity of
the entity seeking the information. You agree that in the event that Xxxxxxxxx
proves either in a court of law or in arbitration that you have disclosed any of
the terms of this Agreement, you shall be liable to the Company for any and all
injuries or damages sustained by the Company, including costs, disbursements and
attorneys' fees incurred by the Company as a result of your disclosure.
You agree that you will not at any time, disparage, demean or criticize
the products, services, or management of the Company or do or say anything to
cause injury to the reputation of the Company or its Officers, executives or
products except to the extent you are pursuing your legal rights as a
shareholder in the Company or in your legal defense as it relates to your duties
as an officer of the Company.
8. RETURN OF PROPERTY. You agree that prior to March 31, 1999, you will
return all company property in your possession including, but not limited to,
your company credit card (or any credit card on which the company is a
guarantor). Further, you agree to repay to the Company the amount of any
permanent or temporary advances and balance owing on any credit cards of any
monies due and owing the Company or for which the Company is a guarantor. The
Company agrees to reimburse you for expenses incurred on behalf of the Company
before March 31, 1999 and properly submitted in accordance with Company policy
by April 15, 1999.
Page 6
9. RELEASE. For the consideration expressed herein, exclusive of
benefits received pursuant to the Company's retirement policy, you hereby
release and discharge the Company and its predecessors, successors, assigns,
subsidiaries and affiliates, counsel and insurers and all of their Officers,
executives, agents, assigns, insurers, representatives, counsel, administrators,
successors, shareholders, and/or directors (hereafter collectively referred to
as the "Released Parties") from any and all claims, demands, actions,
liabilities, damages, or rights of any kind, other than future claims that may
arise by reason of your status as a shareholder, whether known or unknown,
arising out of or resulting from any act or omission by the Company up through
the date of your signature on this Agreement.
You further understand that you are giving up any and all claims,
whether developed or undeveloped, whether known or unknown, including, but not
limited to, all claims, complaints, causes of action or demands which you have
or may have against the Released Parties relating in any way to the terms,
conditions or circumstances of your employment and your retirement from
employment including, but not limited to, statutory or common law claims for
employment discrimination based upon age, sex, sexual orientation, sexual
harassment, religion, race, national origin, disability or other claims arising
under or based upon the Minnesota Human Rights Act, the Minnesota Age
Discrimination Law, Title VII of the Civil Rights Act of 1964, the Employee
Retirement Income Security Act of 1973, the Rehabilitation Act of 1973, the Age
Discrimination in Employment Act, the Americans With Disabilities Act, the Older
Worker Benefit Protection Act, the Equal Pay Act, the Fair Labor Standards Act,
and any other federal, state or local statute or law. You also understands that
you are giving up all claims, including those in contract, quasi-contract or
tort, including but not limited to, claims based on statutory or common law
claims for negligence or other breach of duty, violation of Minn. Stat. Section
176.82, wrongful discharge, breach of express or implied contract, sexual
harassment, promissory estoppel, breach of any express or implied promise,
misrepresentation, fraud, retaliation, assault, battery, negligent or
intentional infliction of emotional distress, defamation, invasion of privacy,
tortious interference with contract, negligent hiring, retention or supervision,
retaliatory discharge contrary to public policy or any other theory whether
legal or equitable.
You understand that this Release will not and does not impair or apply
to any existing vested rights you have under the written terms of any presently
existing employee benefit plans of the Company or which you may have under
worker's compensation and unemployment compensation laws, or by reason of
entering into this Agreement and Release itself.
Page 7
Except as is otherwise prohibited by law, you agree that you will not
institute any claim for damages, by charge or otherwise, nor otherwise authorize
any other party to institute any claim for damages via administrative or legal
proceedings against the Company, its Officers, executives, agents, assigns,
insurers, representatives, counsel, administrators, successors, shareholders,
and/or directors. You also waive the right to money damages or other legal or
equitable relief awarded by any governmental agency related to any such claim.
Except as may be prohibited by law, you agree that if you violate this covenant
not to sue, you will pay the Company' attorney's fees.
This Release does not prohibit claims arising out of the breach of this
agreement.
10. REVIEW OR CONSIDERATION PERIOD. You are advised to consult with
legal counsel before signing this Agreement. You understand that you may take
twenty-one (21) days to consider the terms of this Agreement before you sign it.
You further understand that you may sign the Agreement prior to the expiration
of the twenty-one day (21) day period without prejudice to yourself or to the
Company. You agree that any changes to this Agreement, whether material or
immaterial, do not restart the twenty-one (21) day consideration period. You
further represent that you have carefully read and fully understand all
provisions of this Agreement and that you have had a full opportunity to have
all the terms of this Agreement explained to you by counsel. You understand that
by signing this Agreement, you are giving up all rights to assert any claims
against the Company arising up through the date of your signature on this
Agreement. By your signature, you acknowledge that you fully understand and
accept the terms of this Agreement and you represent and agree that your
signature is freely, voluntarily and knowingly given. You agree that the
promises of the Company in this Agreement are fair and adequate consideration
for the promises and releases you are giving. No payments or benefits pursuant
to this Agreement shall become due and payable until Agreement has become
effective as outlined in Section 12.
11. RESCISSION PERIOD. You understand that you may rescind (that is,
cancel) this Agreement within fifteen (15) calendar days following your
execution of this Agreement with respect to claims under the Minnesota Human
Rights Act. You understand that you may rescind this Agreement within seven (7)
calendar days following your execution of this Agreement with respect to claims
under the Age Discrimination in Employment Act. You have been further informed
and understand that the rescission must be in writing and delivered to the
Company, or, if sent by mail, postmarked within the applicable time period, sent
by certified mail, return receipt requested, and addressed as follows: General
Counsel, Fingerhut Companies, Inc., 0000 Xxxxx Xxxx, Xxxxxxxxxx, XX 00000. You
understand that the Company will have no obligations under this Agreement in the
event such notice is timely delivered.
Page 8
If you exercise your right of rescission under Section 11 of this
Agreement, the Company shall have the right, exercisable by written notice
delivered to the Employee, to terminate this Agreement in its entirety, in which
event the Company shall have no obligation whatsoever to the you hereunder. You
understand that if you rescind this Agreement in accordance with the provisions
of Section 11, this Agreement is null and void; however, any rescission does not
affect your resignation as an employee of the Company effective March 31, 1999.
12. EFFECTIVE DATE. This Agreement does not become effective until the
sixteenth day after you sign it and then only if you have not rescinded it by
following the procedures of Section 11.
13. ARBITRATION OF DISPUTES. Any and all claims or disputes of any
nature between the parties arising from or related to any event, act, claim,
demand, commission or omission by the Company following the date on which this
Agreement is signed shall be resolved exclusively by arbitration before the
American Arbitration Association in Minneapolis, Minnesota pursuant to the
Association's rules for commercial arbitration. The decision of the
arbitrator(s) shall be final and binding upon both parties. Judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. In the event of submission of any dispute to arbitration,
each party shall, not later than thirty (30) days prior to the date set for
hearing, provide to the other party and to the Arbitrator(s) a copy of all
exhibits upon which the party intends to rely at the hearing and a list of all
persons whom the party intends to call as witnesses at the hearing. You and the
Company agree that all documents used in the Arbitration shall be considered
"Confidential" and shall be subject to a Protective Order. You and the Company
further agree that all matters relating to the Arbitration shall be treated as
confidential and that you shall not disclose any information relating to the
Arbitration to any individual or entity other than you, your spouse, counsel,
and the arbitrator. The prevailing party shall be awarded reasonable attorneys'
fees and out-of-pocket costs.
14. NOTICES. All notices and other communications thereunder or in
connection herewith shall be deemed to have been duly given if they are in
writing and delivered personally or sent by registered or certified mail, return
receipt requested and first-class postage prepaid. They shall be addressed:
(a) If to the Company: 0000 Xxxxx Xxxx, Xxxxxxxxxx, XX 00000,
Attention: General Counsel, and
(b) If to Xxx Xxxx: 000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxx 00000
unless notice of a change of address is given to either party by the
other pursuant to the provisions of this Section 15.
15. NON-ADMISSION. This Agreement shall not in any way be construed as
an admission by the Company that it has acted wrongfully against you or violated
any law or
Page 9
statute or that you have any right whatsoever against the Company and the
Company specifically disclaims any liability to, or wrongful acts against you,
on the part of itself, its directors, its employees, its representatives or its
agents.
16. BREACH OF AGREEMENT. If you breach any of the provisions of this
Agreement, your entitlement to compensation under this Agreement shall
immediately cease and you shall be required to repay all amounts paid under the
Agreement except for amounts paid for consulting services actually performed up
until the date of the breach which services shall be compensated at the level of
$300 per hour.
17. MISCELLANEOUS.
(a) This Agreement and the rights and obligations of the parties
hereunder shall not be assignable, in whole or in part, by either
party without the prior written consent of the other party.
(b) The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation
of this Agreement.
(c) This Agreement shall be construed and enforced in accordance
with the laws of the State of Minnesota, both as to interpretation
and performance, without regard to Minnesota's choice of law rules,
it being the intent of the parties that the internal laws and forum
of the State of Minnesota shall govern any and all disputes arising
out of or relating to this Agreement. By the execution of this
Agreement, the parties hereto consent to the jurisdiction of the
state and federal courts of the State of Minnesota, and further
consent to service of process by mail for purpose of instituting
legal proceedings.
(d) Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective only to the extent of such
portion without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such
provisions however, if Section 7 of this Agreement is held invalid,
illegal or unenforceable, in its entirety, this Agreement will be
considered voidable, and, if you seek to void this Agreement, you
agree that you will immediately repay to the Company the total
amount of consideration paid to you under this Agreement less the
amount to be paid to you at the rate of $300 per hour for consulting
services actually performed.
Page 10
(e) This Agreement contains the entire understanding between the
parties with respect to your resignation from employment and it
supersedes all discussions, representations, oral agreements and
negotiations between the parties on this subject. Any amendments,
modifications or waivers of the provisions of this Agreement shall
be valid only if they have been reduced to writing and signed by the
parties. The terms of this Section shall not be deemed to have been
waived by oral agreement, course of performance or by any other
means other than a written agreement expressly providing for such
waiver.
(f) You hereby affirm and acknowledge that you have read the
foregoing Agreement and that you have been advised to consult with
an attorney prior to signing this Agreement. You agree that the
provisions set forth in this Agreement are written in language
understandable to you and further affirm that you understand the
meaning of the terms of this Agreement and their effect. You
represent that you entered into this Agreement freely and
voluntarily.
Page 11
If you are in agreement with the terms set forth in this letter, please
sign both copies and return one to Fingerhut Corporation. The offer made by the
Company in this letter shall be null and void if Fingerhut Company does not
receive an executed acceptance on or before the close of business on January 4,
1999.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
signatures below.
ACCEPTANCE
Accepted this 4TH day of January, 1999.
/s/ XXXXXX X. XXXX
---------------------------------------
SUBSCRIBED AND SWORN
to before me this ____ day
Of ___________, 1999
/s/
----------------------------------
FINGERHUT CORPORATION
By /s/ XXXXXXX X. XXXXXXX
------------------------------------
Its EXECUTIVE VICE PRESIDENT
-------------------------------
SUBSCRIBED AND SWORN
To before me this ____ day
Of _____________, 1999
/s/
----------------------------------
Page 12
