SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT (the "Agreement") is made this 16th day of October,
1997, between X'XXXXXXXX CORPORATION, A Virginia corporation (the "Company"),
and XXXXX X. XXXXXXX ("Executive").
RECITALS
Executive serves as President and Chief Executive Officer of the Company.
The Company and Executive have agreed that Executive will resign his position
with the Company, and they desire to enter into this Agreement relating to
Executive's severance from the Company.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the parties agree as follows:
1. Definitions. As used herein, the following terms have the meanings
indicated:
"Employment Continuity Agreement" means the Employment Continuity Agreement
between the Company and Executive date March 3, 1997.
"Escrow Agreement" means the Escrow Agreement dated July 31, 1997 among the
Company, Melnor, Inc., Gardena Holding AG, GH acquisition Corporation and
Mellon Bank, N. A.
"Salary Continuation Agreement" means the Salary Continuation Agreement
between the Company and Executive dated December 28, 1984, as amended.
"Termination Date" means the date on which Executive's employment with the
Company terminates. Such date will be a date between the date hereof and
September 30, 1998, determined in the discretion of the Board of Directors
of the Company.
2. Resignation. Until the Termination Date, Executive shall continue as
President and Chief Executive Officer of the Company and shall devote his
full working time to the business and affairs of the Company. The Company
shall give Executive at least 30 days prior written notice of the Termination
Date; provided, however, that if no such notice is given, the Termination
Date shall be September 30, 1998. Effective as of the Termination Date,
Executive shall resign as an officer and employee of the Company and as a
director, officer and employee of any affiliate of the Company.
3. Severance Payments.
a. On or before the Termination Date, the Company shall purchase an annuity
(the "Annuity") at competitive rates from a recognized financial institution
selected by the Company in the principal amount of $974,724, which annuity
shall provide for 180 equal monthly payments to the Company, the first such
payment being due and payable on the first day of the first month following
the Termination Date, and the remaining 179 monthly payments being due and
payable on the first day of each month thereafter until all such payments have
been made. The amount of each monthly payment paid to the Company from the
Annuity is herein referred to as the "Annuity Amount." The Annuity and the
monthly payments therefrom shall be owned exclusively by the Company, shall
be subject to the Claims of the Company's general Creditors, and Executive
shall have no rights in or claim against the Annuity or the monthly payments
therefrom. 52
b. The Company shall pay to Executive as severance pay 180 equal monthly
payments in an amount equal to the Annuity Amount, the first such monthly
payment being due and payable on the first day of the first month following
the Termination Date, and the remaining 179 monthly payments being due and
payable on the first day of each month thereafter until all such payments
have been made.
4. Vacation Pay. Within 30 days following the Termination Date, the
Company shall pay to Executive in cash the sum of $31,730.75, which
represents five weeks of accrued and unused vacation time at the rate of
$1,269.23 per day.
5. Salary Continuation Agreement. The Company and Executive are parties
to the Salary Continuation Agreement. The parties agree that for purposes
of Section 5.02 of the Salary Continuation Agreement, Executive's employment
with the Company will terminate on the Termination Date for reasons other
than his voluntary action, his death or his discharge for actions inimical
to the corporate interest, and that consequently Executive will be entitled
to the monthly installment payments called for by the Salary Continuation
Agreement. The parties further agree that for purposes of computing the
amount of the monthly installment payments under the Salary Continuation
Agreement, Executive shall be deemed to have completed 25 years of service
with the Company, so that 100% of the full benefit will be payable on the
terms and conditions provided for in the Salary Continuation Agreement.
6. Consulting Agreement. For a period of one year following the
Termination Date, Executive agrees to hold himself available to provide
consulting services to the Company at such reasonable times and places as
the Company may request from time to time; provided, however, that Executive
shall not be required to provide consulting services except during normal
business hours or at locations other than Winchester and other locations
where the Company maintains a facility. In exchange for Executive's agreement
to hold himself available to provide such consulting services, the Company
shall pay Executive a retainer of $25,000 payable 30 days after the
Termination Date. The retainer shall be retained by Executive whether or
not he is requested to perform consulting services. If Executive is
requested to perform consulting services, he will be paid, through credits
against the retainer, a daily fee of $1,350 until the retainer is exhausted.
If executive is requested to perform consulting services after the retainer
is exhausted, he will be paid a daily fee of $1,350 payable within 30 days
of receipt of Executive's invoice for such services. In addition, the
Company shall reimburse Executive for all reasonable and documented
out-of-pocket expenses incurred in the performance of his consulting services.
7. Melnor Bonus. The Company is a party to the Escrow Agreement.
Pursuant to Section 6 of the Escrow Agreement, the Company may receive
payments from the Escrow Funds (as defined in the Escrow Agreement), each
such payment being herein referred to as a "Melnor Escrow Payment," on
December 31, 1999, July 31, 2000, and at such times as all Claims (as
defined in the Escrow Agreement) are resolved. Within 30 days following
receipt by the Company of each Melnor Escrow Payment, the Company shall pay
to Executive an amount equal to the product obtained by multiplying $100,000
by a fraction, the numerator of which shall be the amount of such Melnor
Escrow Payment and the denominator of which shall be $2,500,000; provided,
however, that the total amount that the Company shall be required to pay
Executive from all such Melnor Escrow Payments shall not exceed $100,000.
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8. Board of Directors. Executive currently serves on the Board of
Directors of the Company. The Company will cause the Nominating Committee
of the Board of Directors to nominate Executive for reelection to the Board
of Directors at the 1998 annual meeting of stockholders. The Company expects
to, but shall not be required to, nominate Executive for reelection to the
Board of Directors at the 1999 annual meeting of stockholders and at
subsequent annual meetings, assuming that Executive is eligible for reelection
under the Company's standard policies relating to directors, and assuming that
the Company then determines that Executive's reelection as a director would be
in the best interests of the Company and its shareholders.
9. Employment Continuity Agreement. The Company and Executive are
parties to the Employment Continuity Agreement. This Agreement supersedes
the Employment Continuity Agreement, the Employment Continuity Agreement is
hereby terminated and canceled, and neither party shall have any further
obligation to the other under the Employment Continuity Agreement.
10. General Release of Company. In consideration of the payments and
other promises made by the Company hereunder, executive hereby releases and
forever discharges the Company and its affiliates from any and all claims,
known or unknown, at law and equity that he has or may have as of the date
hereof arising out of or relating to his employment or the termination of
his employment with the Company, including but not limited to any claims for
wrongful discharge, breach of express or implied contract, defamation,
liability in contract, liability in tort, any claims under Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Employee Retirement Income Security Act, the Fair Labor Standards Act, or any
other federal or state law relating to employment, employee benefits or the
termination of employment. Notwithstanding the preceding sentence, nothing
in this Agreement shall affect Executive's rights (as such rights are modified
by Section 5 hereof) under the Salary Continuation Agreement or under the
Company's Retirement Savings Plan.
11. Specific Release Under ADEA. Executive acknowledges that (i) the
release in Section 10 includes a release of all claims that Executive has or
may have as of the date hereof under the Age Discrimination in Employment
Act, (ii) that he has been advised in writing to consult with an attorney
before executing this release, (iii) that he has been given a period of at
least 21 days within which to consider this release, and (iv) that this
release is knowing and voluntary. The parties agree that this Agreement shall
not become effective and enforceable until seven days following the execution
of this Agreement, and that on or before the expiration of such seven-day
period, Executive may revoke this Agreement by delivering written notice to
the Chairman of the Board of Directors of the Company. If such notice is not
delivered before the expiration of such seven-day period, this Agreement shall
become effective and enforceable.
12. Release of Executive. In consideration of the promises made by
Executive hereunder, the Company, on behalf of itself and its affiliates,
hereby releases and forever discharges Executive from any and all claims,
known or unknown, at law or in equity, that the Company has, or may have as
of the date hereof, arising out of or relating to Executive's employment or
the termination of executive's employment with the Company or with any
affiliate of the Company.
13. Withholding Taxes. All payments that the Company is required to make
to Executive hereunder shall be subject to all required withholdings for
state and federal taxes.
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14. Successors. This agreement shall be binding upon and inure to the
benefit of the Company, the Executive, and their respective heirs,
representatives and successors.
15. Entire Agreement; Amendment. This Agreement constitutes the entire
agreement between the Company and Executive relating to the subject matter
hereof. This Agreement may not be amended or modified except by an
instrument in writing signed by the parties hereto.
16. Governing Law. This agreement shall be governed by and construed and
enforced in accordance with the laws of Virginia.
IN WITNESS WHEREOF, the parties have duly executed this agreement as of the
day and year first written above.
X'XXXXXXXX CORPORATION
By: /s/ Xxxxxx X. Xxxxxx XX
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Title: Chairman
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/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx (Executive)
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