SEPARATION AGREEMENT AND GENERAL RELEASE
Exhibit 10.1
SEPARATION AGREEMENT AND GENERAL RELEASE
This Separation Agreement and General Release (the “Agreement”) is between Petroleum
Development Corporation, a Nevada corporation (the “Company”), and Xxxxxxx X. XxXxxxxxxx (the
“Executive”) (collectively, the “Parties” and each a “Party.”).
WHEREAS, Executive was employed by the Company in the position of Chief Executive Officer
pursuant to the terms and conditions set forth in that certain Employment Agreement, dated as of
April 19, 2010, between Executive and the Company (the “Employment Agreement”), which Employment
Agreement provided for an employment term through December 31, 2011; and
WHEREAS, Executive also served as Chairman of the board of directors (the “Board”) of the
Company; and
WHEREAS, on June 10, 2011 (the “Termination Date”), Executive resigned from any and all
positions (as an officer, director, employee or otherwise) with the Company and any and all
subsidiaries and affiliated entities of the Company including, but not limited to, PDC Mountaineer,
LLC (collectively, the “PDC Affiliates”) in exchange for a promise by the Company that such
resignation will be considered, for all purposes, a “Termination by the Company Without Just Cause”
under Section 7(d) of his Employment Agreement and under any and all benefit and compensation plans
applicable to Executive, to negotiate in good faith this Agreement and to pay all amounts and
benefits required by Section 7(d) of the Employment Agreement; and
WHEREAS, pursuant to the terms of his Employment Agreement, Executive is required to release
all Claims (as hereinafter defined), actions or causes of action against the Company and each of
its subsidiaries and affiliates and each of their respective officers, employees, directors,
successors and assigns in any way related to his employment with the Company or the termination
thereof and make certain commitments in exchange for certain separation benefits; and
WHEREAS, the Company and Executive agree that it is in the best interests of each party that
the terms and conditions of Executive’s separation from employment be expressly set forth in a
definitive agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and obligations set
forth herein and for other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged and accepted, the Parties hereto, intending to be legally bound, agree as
follows:
1. Recitals. The foregoing recitals are true and correct and incorporated herein.
2. Separation Benefits. In consideration for the Executive’s resignation as the
Company’s Chief Executive Officer, Chairman of the Board and all other positions he holds (as an
officer, director, employee or otherwise) with the Company and any and all subsidiaries and
affiliated entities, the early termination of the Employment Agreement, the covenants described
in Sections 5 through 10 of this Agreement, the general release described in Section 3 of this
Agreement and other consideration described herein, the receipt and adequacy of which are hereby
acknowledged, the Company agrees to pay or provide to or for the Executive the following payments
and benefits, provided Executive executes this Agreement without revocation:
(a) Separation Compensation. Within forty (40) days after the Termination
Date, the Company shall pay to the Executive a lump sum cash payment in the amount of Four
Million One Hundred Twenty-Five Thousand Dollars ($4,125,000), less required withholdings
(equal to 35%);
(b) Accrued and Unpaid Compensation. Executive shall be entitled to receive
any compensation earned but not yet paid prior to the Termination Date in accordance with
the Company’s normal payroll practices.
(c) Expense Reimbursement. Company shall pay to the Executive any unpaid
expense reimbursement for periods on or prior to the Termination Date upon presentation by
the Executive of an accounting of such expenses in accordance with normal Company practices.
All unpaid expense reimbursements shall be paid by the Company within thirty (30) days of
delivery to the Company of such accounting and receipts and no later than March 15, 2012.
(d) Qualified Retirement Plan. As of the date hereof, Executive had a vested
account balance in the Company’s qualified retirement plan. Executive shall be entitled to
such vested account balance under the Company’s qualified retirement plan upon processing
the appropriate distribution forms following his separation in accordance with the terms of
the qualified retirement plan. Such vested account balance shall include Executive’s vested
portion of the 2010 Company contribution (remitted to the qualified retirement plan in March
2011) and Executive’s 401(k) deferrals through his Termination Date, all as adjusted for
earnings to the date of distribution.
(e) Supplemental Retirement Benefit. On June 10th (or in the event June 10th
is not a business day, the following business day) in each of the years 2012 through 2021,
inclusively, Executive shall be entitled to receive an annual nonqualified deferred
supplemental retirement benefit equal to $30,000, less required withholdings.
(f) COBRA Coverage. Provided the Executive timely elects COBRA coverage,
continued coverage of the Executive and any dependents covered as of the Termination Date
under the Company’s group health plans at the Company’s cost for a period equal to the
lesser of (i) 18 months from the Termination Date or (ii) such period ending as of the date
the Executive is eligible to participate in another employer’s group health plan. To the
extent required by law, Executive will receive compensation equal to this benefit and shall
pay all associated taxes. The COBRA continuation period for health care benefits provided
pursuant to this Agreement shall be deemed to run concurrent with the continuation period
federally mandated by COBRA (generally 18 months), or any other legally mandated and
applicable federal, state, or local coverage
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period for benefits provided to terminated
employees under the Company’s health care plan(s).
(g) Stock Appreciation Rights (“SARs”): The Parties agree that the following
is a complete list of all of the Executive’s outstanding SAR Awards as of the Termination
Date and that such awards shall be treated as described below:
(1) SAR Award for 25,371 shares granted to the Executive on April 19, 2010
shall become fully vested.
(2) SAR Award for 12,992 shares granted to the Executive on March 12, 2011
shall become fully vested.
(h) Stock Options: The Parties agree that the following is a complete list of
all of the Executive’s outstanding Stock Option Awards as of the Termination Date and that
such award shall be treated as described below:
(1) Stock Option Award for 3,333 shares granted to the Executive on November
14, 2006 became fully exercisable as of November 14, 2010.
(i) Restricted Stock: The Parties agree that the following is a complete list
of all of the Executive’s outstanding Restricted Stock Awards as of the Termination Date and
that such awards shall be treated as described below:
(1) Restricted Stock Award for 5,056 shares granted to Executive on March 7,
2008 shall become fully vested;
(2) Restricted Stock Award for 13,878 shares granted to Executive on March 7,
2008 shall become fully vested;
(3) Restricted Stock Award for 27,306 shares granted to Executive on March 4,
2009 shall become fully vested;
(4) Restricted Stock Award for 43,566 shares granted to Executive on April 19,
2010 shall become fully vested; and
(5) Restricted Stock Award for 14,928 shares granted to Executive on March 12,
2011 shall become fully vested.
(j) Performance Shares: The Parties agree that the following is a complete
list of all of the Executive’s outstanding Performance Share Awards as of the Termination
Date and that such awards shall be treated as described below:
(1) Performance Share Award for 12,175 shares (at target) granted to Executive
on March 4, 2009 shall vest to the extent of 4,109 shares (determined by multiplying
(i) 12,175 shares by (ii) the product of (x) 9/20 (the percentage of time vested) by
(y) 75% (the percent of
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goal achieved)), to be issued within seven (7) days of the
Effective Date (as hereinafter defined), less required withholdings.
(2) The Executive acknowledges that he is not entitled to any shares or other
compensation related to the performance share award for 8,290 shares (at target)
granted to him on March 7, 2008.
(3) The Executive acknowledges that the performance share award for 5,571
shares (at target) granted to him on March 12, 2011 shall be forfeited pursuant to
the terms of the performance share agreement evidencing such award.
(k) Vested SARs and Stock Options. The Executive shall have three months from
the Termination Date to exercise any SARs or stock options held by the Executive as of the
Termination Date that have vested but remain unexercised as of that date. Any SARs or stock
options that are not exercised within this time frame shall be forfeited and in accordance
with terms and conditions covering such SARs or stock options, as applicable.
(l) Tax Withholding. The Company will be entitled to withhold from the
benefits and payments described in this Agreement, all income and employment taxes as
directed by the Executive, as long as such request meets the minimum required to be withheld
under applicable law. For all vested equity awards, the Company will withhold the
designated income and employment tax amount in shares of Company Stock.
(m) Section 409A Compliance. The provisions of this Agreement will be
administered, interpreted and construed in a manner intended to comply with Section 409A of
the Code (“Section 409A”), the regulations issued thereunder or any exception thereto. For
purposes of this Agreement, each payment is intended to be excepted from Section 409A to the
maximum extent provided under Section 409A as follows: (i) each payment that is scheduled to
be made following Executive’s Termination Date and within the applicable 21/2 month period
specified in Treas. Reg. § 1.409A-1(b)(4) is intended to be excepted under the short-term
deferral exception as specified in Treas. Reg. § 1.409A-1(b)(4); and (ii) post-termination
medical benefits are intended to be excepted under the medical benefits exception as
specified in Treas. Reg. § 1.409A-1(b)(9)(v)(B), and (iii) each payment that is not
otherwise excepted under the short-term deferral exception or medical benefits exception is
intended to be excepted under the involuntary separation pay exception as specified in
Treas. Reg. § 1.409A-1(b)(9)(iii). Each payment under this Agreement, including each
installment payment, shall be treated as a separate payment and Executive shall have no
right to designate the date of any payment hereunder. With respect to any payment subject to
Section 409A of the Code (and not excepted therefrom), if any, it is intended that each such
payment is paid on permissible distribution event and at a specified time consistent with
Section 409A of the Code. Notwithstanding any provision of this agreement to the contrary,
Executive acknowledges and agrees that the Released Parties shall not be liable for, and
nothing provided or contained in this Agreement will be construed to obligate or cause the
Released Parties to be liable for, any tax, interest or penalties imposed on Executive
related to or arising with respect to any violation of Section 409A.
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(n) D&O Insurance Coverage. The Company shall use commerically reasonable
efforts to obtain or maintain in effect D&O liability insurance which
policy(ies) shall (i) cover and include Executive in all capacities in which Executive
served for the Company (including as an officer, director, or manager) for the PDC
Affiliates during all periods prior the Termination Date; and (ii) be effective for a
period of six years after the Termination Date.
(o) Issuance of Shares. All shares of the equity interests described herein
shall be issued within seven (7) days of the Effective Date.
3. General Release. In consideration of the Company’s obligations, Executive hereby
releases, acquits and forever discharges Company and each of its subsidiaries and affiliates and
each of their respective officers, employees, directors, successors and assigns from any and all
claims, actions or causes of action in any way related to his employment with the Company or the
termination thereof, whether arising from tort, statute or contract, including but not limited to,
claims of defamation, claims arising under the Employee Retirement Income Security Act of 1974, as
amended, the Age Discrimination in Employment Act of 1967, as amended by the Older Workers Benefit
Protection Act of 1990, Title VII of the Civil Rights Act of 1964, as amended, the Americans with
Disabilities Act, the Family and Medical Leave Act, the discrimination and wage payment laws of
Colorado and any other federal, state or local statutes or ordinances of the United States, it
being Executive’s intention and the intention of the Company to make this release as broad and as
general as the law permits. Executive understands that this Agreement does not waive any rights or
claims that may arise after his execution of it and does not apply to claims arising under the
terms of this Agreement.
This release is intended to be a general release, and excludes only those claims under any
statute or common law that Executive is legally barred from releasing. Executive is advised to
seek independent legal counsel if Employee seeks clarification on the scope of this release.
Signing this Agreement does not waive Employee’s right to seek a judicial determination of the
validity of Employee’s release of rights arising under the Age Discrimination in Employment Act.
Nothing herein is intended to or shall preclude Employee from filing a charge with any appropriate
federal, state, or local government agency and/or cooperating with said agency in its
investigation. Employee, however, explicitly waives any right to file a personal lawsuit or receive
monetary damages that the agency may recover against Releasees, without regard as to who brought
any said complaint or charge.
4. Consult With an Attorney. The Company hereby advises Executive to consult with an
attorney of Executive’s choice (at Executive’s expense) before Executive signs this Agreement. If
Executive has any questions regarding the scope of the release, including those rights that are not
released, the Company advises Executive to address that subject with Executive’s own attorney
before Executive signs this Agreement. The Company will rely on Executive’s signature on this
Agreement as Executive’s representation that Executive read this Agreement carefully before signing
it, and that Executive has a full and complete understanding of its terms.
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5. SEC Required Filings; Press Release. The Executive hereby acknowledges that the
Company is required to file this Agreement with the U.S. Securities and Exchange Commission
pursuant to the rules of the Securities Exchange Act of 1934, as amended. No Party shall issue any
press release relating, directly or indirectly, to this Agreement, the Employment Agreement or
Executive’s employment with the Company without the other Party’s prior written consent, which
consent shall not be unreasonably withheld.
6. Confidential Information. Through the Effective Date, Executive has not and agrees
not to in the future, directly or indirectly, disclose to any third parties, or use in any manner,
any information acquired by the Executive during his employment by the Company with respect to any
clients or customers of the Company or any confidential, proprietary or secret aspect of the
Company’s operations or affairs unless such information has become public knowledge other than by
reason of actions, direct or indirect, of the Executive. Information subject to the provisions of
this Section 6 include, without limitation:
(i) Brokers, broker/dealer firms, law firms used to prepare Company and partnership
registration statements, due diligence investigations, or other parties involved with the
registration, review, or offering of the Company’s securities and drilling programs;
(ii) Names, addresses, and other information regarding investors in the Company’s
drilling programs;
(iii) Names, addresses and other information regarding investors who participate with
the Company in the drilling, completion or operation of oil and gas xxxxx as joint venture
partners, working interest owners, or in any other form of ownership;
(iv) Lists of or information about personnel seeking employment with or who are
currently employed by the Company;
(v) Maps, logs, drilling reports and any other information regarding past, planned or
possible future leasing, drilling, acquisition, or other operations that the Company has
completed or is investigating or has investigated for possible inclusion in future
activities; and
(vi) Any other information or contacts relating to the Company’s drilling, development,
fund-raising, purchasing, engineering, marketing, merchandising, and selling activities.
7 Non-Compete. Executive has not and agrees not to for a period of one (1) year
following the Termination Date, directly engage in any Competitive Business within any county or
parish or adjacent to any county or parish in which the Company or any affiliate owns any oil and
gas interests; provided, however, that the ownership of less than five percent (5%) of the
outstanding capital stock of a corporation whose shares are traded on a national securities
exchange or on the over-the-counter market shall not be deemed engaging in a Competitive Business.
“Competitive Business” shall mean typical oil and gas exploration and production activities
including oil and gas leasing, drilling or any other business activities that are the same
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as or similar to the Company’s or an affiliate’s business operations as its business exists on
the Termination Date.
8. Non-Solicitation. Executive has not and agrees not to, directly or indirectly,
for a period of one (1) year following the Termination Date (i) solicit the services of any person
who is a full-time employee of the Company, its subsidiaries, divisions, or affiliates, or
otherwise induce such employee to terminate or reduce employment with the Company, or (ii) solicit
the business of any person who is a client or customer of the Company, its subsidiaries, divisions,
or affiliates. For purposes of this Agreement, the term “person” includes natural persons,
corporations, business trusts, associations, sole proprietorships, unincorporated organizations,
partnerships, joint ventures, limited liability companies or partnerships, and governments, or any
agencies, instrumentalities, or political subdivisions thereof.
9. Nondisparagement. Since the Termination Date Executive has not made and agrees not
to make, following the Effective Date, any negative comments or otherwise disparage the Company or
its officers, directors, employees, shareholders or agents, in any manner likely to be harmful to
them or their business, business reputation or personal reputation. The Company agrees that the
members of the Board and officers of the Company as of the date hereof has not made, and will not
make, while employed by the Company or serving as a director of the Company, as the case may be,
any negative comments about Executive or otherwise disparage Executive in any manner that is likely
to be harmful to the Executive’s business or personal reputation. The foregoing shall not be
violated by truthful statements in response to legal process or required governmental testimony or
filings, and the foregoing limitation on the Company’s directors and officers will not be violated
by statements that they in good faith believe are necessary or appropriate to make in connection
with performing their duties for or on behalf of the Company. Promptly after the Effective Date,
the Company shall deliver to Executive a letter of recommendation as mutually agreed upon by the
Parties prior to the Execution Date.
10. Cooperation in Litigation. At the Company’s reasonable request, Executive shall
use his good faith efforts to cooperate with the Company, its affiliates, and each of its and their
respective attorneys or other legal representatives (“Attorneys”) in connection with any claim,
litigation or judicial or arbitral proceeding which is material to the Company and is now pending
or may hereinafter be brought against the Released Parties by any third party; provided, that,
Executive’s cooperation is essential to the Company’s case. Executive’s duty of cooperation will
include, but not be limited to (a) meeting with the Company’s and/or its affiliates’ Attorneys by
telephone or in person at mutually convenient times and places in order to state truthfully
Executive’s knowledge of matters at issue and recollection of events; (b) appearing at the
Company’s, its affiliates’ and/or their Attorneys’ request (and, to the extent possible, at a time
convenient to Executive that does not conflict with the needs or requirements of Executive’s
then-current employer or Executive’s professional engagements or obligations) as a witness at
depositions or trials, without necessity of a subpoena, in order to state truthfully Executive’s
knowledge of matters at issue; and (c) signing at the Company’s, its affiliates’ and/or their
Attorneys’ request declarations or affidavits that truthfully state matters of which Executive has
knowledge. The Company shall reimburse Executive for the reasonable costs and expenses incurred by
him in the course of his cooperation hereunder, including reasonable attorney’s fees and costs, and
shall pay to Executive per diem compensation in an amount equal
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to the daily prorated portion of the Executive’s base salary immediately prior to the
Termination Date. The obligations set forth in this Section 10 shall survive any termination or
revocation of this Agreement.
11. Representations. By signing below, Executive represents and agrees that (a)
Executive has fully and carefully read this Agreement prior to signing it and understands its
terms; (b) Executive has been, or has had the opportunity to be, advised by independent legal
counsel of Executive’s own choice as to the legal effect and meaning of each of the terms and
conditions of this Agreement, and is entering into this Agreement freely and voluntarily and not in
reliance on any promises or representations other than as set forth in this Agreement; (c) except
for Executive’s Blackberry cell phone (and related phone number) and Apple iPad computer, all of
which items shall be deemed assigned to, and owned by, Executive as of the Termination Date
(provided that Executive shall deliver the Blackberry cell phone and Apple iPad to the Company
within three (3) days after the Effective Date for a 48-hour period so that the Company can ensure
no Company data remains on those devices), Executive has returned to the Company all Company
property (other than personal information, files or documents of, belonging to or regarding
Executive) including, without limitation, all computers, maps, logs, data, drawings and other
records and written and digital material prepared or compiled by the Executive or furnished to the
Executive during his employment with the Company (including, without limitation, materials located
on the Executive’s personal computer), unless such information has become public knowledge other
than by reason of actions, direct or indirect, of the Executive; and (d) except for any vested
benefits Executive may have under Company sponsored plans, the Company does not owe Executive any
other wages, compensation, or benefits of any kind or nature.
12. Breach. Executive agrees and recognizes that should Executive breach any of the
obligations or covenants set forth in this Agreement or otherwise revoke this Agreement, the
Company will have no further obligation to provide Executive with the consideration set forth
herein, and will have the right to seek repayment of all consideration paid up to the time of any
such breach or revocation. Further, Executive acknowledges in the event of a breach of this
Agreement, the Released Parties may seek any and all appropriate relief for any such breach,
including equitable relief and/or money damages, reasonable attorney’s fees and costs; provided,
that (i) the Company has notified Executive in writing within 30 days of the date of the failure of
Executive to perform such material obligation and (ii) such failure remains uncorrected and/or
uncontested by Executive for 15 days following the date of such notice. Notwithstanding the
foregoing, in the event the Company fails to perform any material obligation under this Agreement,
including, without limitation, the failure of the Company to make timely payments of monies due to
Executive hereunder, this Agreement shall be null and void and Executive shall have the right to
pursue any and all appropriate relief for any such failure, including equitable relief and/or
monetary damages, attorneys’ fees and costs; provided, that (i) Executive has notified the Company
in writing within 30 days of the date of the failure of the Company to perform such material
obligation and (ii) such failure remains uncorrected and/or uncontested by the Company for 15 days
following the date of such notice.
13. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Colorado applicable to agreements
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negotiated, entered into and wholly to be performed therein, without giving effect to the
principles of conflicts of law.
14. Severability. Each of the respective rights and obligations of the Parties
hereunder will be deemed independent and may be enforced independently irrespective of any of the
other rights and obligations set forth herein. If any provision of this Agreement should be held
by any court of competent jurisdiction to be illegal or invalid, such illegality or invalidity will
not affect in any way other provisions hereof, all of which will continue, nevertheless, in full
force and effect.
15. Entire Agreement; Modification. This Agreement constitutes the entire
understanding between the Parties with respect to the subject matter hereof and may not be modified
without the express written consent of both Parties. This Agreement supersedes all prior written
and/or oral and all contemporaneous oral agreements, understandings and negotiations regarding its
subject matter, including the Employment Agreement, effective as of the Effective Date. Nothing in
this Agreement shall be construed or deemed to terminate or otherwise amend or modify the
Indemnification Agreement, which agreement shall remain in full force and effect in accordance with
its terms. This Agreement may not be modified or canceled in any manner except by a writing signed
by both Parties.
16. Non-Admission of Liability. Nothing in this Agreement will be construed as an
admission of liability by Executive or the Released Parties; rather, Executive and the Released
Parties are resolving all matters arising out of the employer-employee relationship between
Executive and the Company and all other relationships between Executive and the Released Parties.
17. Counterparts. This Agreement may be executed in one or more counterparts, each of
which will be considered an original instrument and all of which together will be considered one
and the same agreement and will become effective when all executed counterparts have been delivered
to the respective Parties. Delivery of executed pages by facsimiles transmission or e-mail will
constitute effective and binding execution and delivery of this Agreement.
18. Binding Effect. This Agreement will be binding upon the Parties and their
respective heirs, administrators, representatives, executors, successors and assigns, and will
inure to the benefit of the Parties and their respective heirs, administrators, representatives,
executors, successors and assigns.
19. Acceptance, Revocation and Effective Date.
(a) Executive has twenty-one (21) days from the date Executive receives this Agreement to
consider its terms and conditions. Any changes to this Agreement during that period, whether
material or not, will not extend the 21-day period.
(b) Executive may confirm his acceptance of the terms and conditions of this Agreement by
signing and returning two (2) original copies of this Agreement to the Company’s
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General Counsel and Secretary at the address listed below no later than 5:00 p.m. Mountain
Time twenty-one (21) days after Executive’s receipt of this Agreement.
Xxxxxx X. Xxxxxx
General Counsel and Secretary
Petroleum Development Corporation
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
General Counsel and Secretary
Petroleum Development Corporation
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
(c) If Executive signs this Agreement, Executive may still revoke Executive’s acceptance of
the Agreement for up to seven (7) days after the Executive signs it by notifying the Company in
writing before the expiration of that seven-day period. The written notice should be delivered in
person or, if sent by mail, postmarked no later than the 7th day and mailed to the Company’s
General Counsel and Secretary at the address provided in Section 19(b) above.
(d) If not revoked, this Agreement will become effective on the later of (i) the 8th day after
Executive signs this Agreement or (ii) the date the Company signs this Agreement, which cannot be
later than fourteen (14) days after the Executive signs this Agreement (the “Effective Date”). If
Executive does not sign this Agreement within the twenty-one-day period, or if Executive timely
revokes this Agreement during the seven-day revocation period, this Agreement will not become
effective and Executive will not be entitled to the Separation Benefits provided for in Section 2.
[Remainder of Page Intentionally Left Blank — Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Separation Agreement
and General Release as of the date first above written.
| By: | /s/ Xxxxxxx X. Xxxxxxxxx | |||
| Xxxxxxx X. Xxxxxxxxx | ||||
| Title: | Chairman of the Board | |||
| /s/ Xxxxxxx X. XxXxxxxxxx | ||||
| Xxxxxxx X. XxXxxxxxxx | ||||
[Signature Page to Separation Agreement and General Release]
