1
Exhibit 10.1
SEVERANCE AGREEMENT
THIS AGREEMENT between Cyrk, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and Xxxxxxx X. Xxxxxxx (hereinafter referred to as the
"Executive"), dated as of this 31st day of December, 1998:
WHEREAS, the Executive is the Chairman and Chief Executive Officer of
the Company and an integral part of its management;
WHEREAS, the Company has determined to effect certain changes in management of
the Company, which changes contemplate, inter alia, the termination of the
Executive's employment with the Company;
WHEREAS, the Company wishes to provide to the Executive fair severance in
connection with the termination of his employment and to assure the Executive of
certain other benefits upon such event;
NOW, THEREFORE, in consideration of the mutual promises set forth herein and of
the Executive's past employment with and contributions to the Company and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
Capitalized terms used and not otherwise defined upon first usage herein are
defined in EXHIBIT A attached to this Agreement.
1. SEVERANCE BENEFITS.
1.1. BASIC BENEFITS. On December 31, 1998 (the "Effective Date"), the
Executive's employment with the Company shall terminate, and the
Executive shall be entitled to the following benefits:
(a) Over a period of three (3) years, commencing on the Effective Date and
continuing until December 31, 2001 (the "Severance Period"), the
Company shall pay to the Executive an aggregate amount equal to
$1,224,924, such aggregate amount to be paid in 72 equal payments of
$17,012.83 each, each such payment to be made on the 15th and last day
of each calendar month commencing on January 15, 1999 and continuing
thereafter on the last
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and 15th day of each subsequent calendar month through and including
December 31, 2001.
(b) Until the end of the Severance Period, the Company shall maintain in
full force and effect for the benefit of the Executive and his family
the following benefits:
(i) all life, medical, dental, vision and disability insurance plans
and other benefit programs, including, without limitation, those
described in the Cyrk Employee Handbook, in which the Executive was
entitled to participate immediately prior to the Effective Date;
provided, that if the Executive's continued participation is not
possible under the terms of such plans and programs, the Company shall
instead arrange to provide the Executive with substantially similar
benefits upon comparable terms; and
(ii) the Special Child Care Benefit.
(c) For a period of six (6) months commencing on the Effective Date and
continuing through and including June 30, 1999, the Company shall
maintain in full force and effect for the benefit of the Executive and
his family the following benefits:
(i) the Accountant Benefit;
(ii) the Apartment Benefit;
(iii) the Club Benefit;
(iv) the Phone and Subscription Benefit; and
(v) the New York Office Benefit.
(d) ACCRUED VACATION; PERSONAL DAYS. As soon as practicable after the
Effective Date, the Company shall pay to the Executive in cash the
amount due to the Executive, as of the Effective Date, for accrued
vacation time and personal days, as determined by reference to his
Base Salary, it being agreed that the Executive shall have, as of the
Effective Date, five (5) weeks of accrued vacation due and
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nine (9) personal days, having an aggregate value of $34,038.
(e) CASH PAYMENT. In addition to the payment described in paragraph (d)
above, as soon as practicable after the Effective Date, the Company
shall pay to the Executive a cash payment of $150,000.
(f) SPLIT-DOLLAR LIFE INSURANCE POLICIES. In accordance with the
Company's commitment to do so as set forth in its letter dated April
3, 1996 to Winged Keel Group, Inc., the Company shall continue to pay
all scheduled premiums in full for the split-dollar life insurance
policies currently existing on the life of the Executive and his
spouse, according to current terms and provisions and as currently in
effect, for eleven (11) years from the Effective Date, as more fully
set forth in EXHIBIT B attached hereto. In addition, pursuant to such
commitment, the Company shall not be entitled to the repayment of the
Company's collateral interest in such policies until the surrender of
such policies by the trusts holding the same, the second death of the
two insureds with respect to the second-to-die policies, and the death
of the insured with respect to the single life policies, as stated in
the applicable split-dollar agreements.
(g) AUTOMOBILE BENEFIT. For a period of two (2) years commencing on the
Effective Date and continuing through and including December 31, 2000,
the Company shall maintain the Automobile Benefit in full force and
effect for the continued benefit of the Executive and his family.
(h) LOAN FORGIVENESS. As of the Effective Date, the Company shall forgive
all remaining payments due from the Executive to the Company, totaling
$256,947, under certain loan arrangements existing as of the
Effective Date between the Executive and the Company.
(i) OFFICE EQUIPMENT. As soon as practicable after the Effective Date, the
Company shall provide the Executive with two personal computers and
one facsimile machine, comparable in quality to those currently used
by him and Xxxxx Xxxxx at the Company's Gloucester office, for use by
the Executive in his home.
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1.2. OPTIONS AND OTHER STOCK AWARDS. On the Effective Date, all options and
stock appreciation rights granted under the Company's various stock
plans to the Executive as of the Effective Date shall, notwithstanding
any provision of such options, rights and/or plans to the contrary,
terminate and be canceled in full.
1.3 COORDINATION WITH PARACHUTE TAX RULES. Payments under Sections 1.1
and 3 shall be made without regard to whether the deductibility of
such payments (or any other payments to or for the benefit of the
Executive) would be limited or precluded by Internal Revenue Code
Section 280G and without regard to whether such payments (or any other
payments) would subject the Executive to federal excise tax levied on
certain "excess parachute payments" under Internal Revenue Code
Section 4999; provided, that if the total of all payments to or for
the benefit of the Executive, after reduction for all federal taxes
(including the tax described in Internal Revenue Code Section 4999, if
applicable) with respect to such payments ("Executive's total
after-tax payments"), would be increased by the limitation or
elimination of any payments under Sections 1.1 and 3, amounts payable
under Sections 1.1 and 3 shall be reduced to the extent, and only to
the extent, necessary to maximize Executive's total after-tax
payments. The determination as to whether and to what extent payments
under Sections 1.1 and 3 are required to be reduced in accordance
with the preceding sentence shall be made at the Company's expense by
PricewaterhouseCoopers or by such other certified public accounting
firm, law firm, or benefits consulting firm as the Compensation
Committee of the Company's Board of Directors may designate. In the
event of any underpayment or overpayment under Sections 1.1 and 3 as
determined by PricewaterhouseCoopers (or such other firm as may have
been designated in accordance with the preceding sentence), the amount
of such underpayment or overpayment shall forthwith be paid to
Executive or refunded to the Company, as the case may be, with
interest at the applicable federal rate provided for in Section
7872(f)(2) of the Internal Revenue Code.
2. NONCOMPETITION; NON-SOLICITATION; NO DISPARAGEMENT.
2.1. SCOPE AND PERIOD. The Executive agrees that he will not become an
employee, consultant, or advisor to any competitor of the Company, or
any Subsidiary, for a period of two (2) years commencing on the
Effective Date and continuing until December 31, 2000. The Executive
further agrees that he will not solicit any clients, active prospects,
suppliers or employees of
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the Company, or any Subsidiary, during the Severance Period. No
provision hereof shall prohibit the Executive from offering to employ
any person employed by the Company, or any Subsidiary, who, without
any solicitation by the Executive, initiates contact with the
Executive for the purpose of employment. The Company and the Executive
agree that neither party shall make any comments to any person,
including any potential customers, clients, partners or acquaintances
of either party, or to the media, disparaging the integrity or
reputation of the other party.
2.2. NO DUTY TO MITIGATE DAMAGES. The Executive's benefits under this
Agreement shall be considered severance pay in consideration of his
past service, and as an inducement to him to enter into and become
bound by this Agreement, and his entitlement thereto shall neither be
governed by any duty to mitigate his damages by seeking further
employment nor offset by any compensation that he may receive from
future employment nor is it dependent upon whether or not the
Executive provides services of any type to, or continues to serve as a
member of the Board of Directors of, the Company or any Subsidiary.
2.3. OTHER AGREEMENTS. If for any reason the Executive receives severance
payments (other than under this Agreement) from the Company or its
Subsidiaries upon the termination of his employment with the Company,
the amount of such payments shall be deducted from the amount paid
under this Agreement. The purpose of this provision is solely to avert
a duplication of benefits; and neither this provision nor the
provisions of any other agreement shall be interpreted to reduce the
amount payable to the Executive below the greater of the amount that
would otherwise have been payable under this Agreement or under other
agreements.
2.4. WITHHOLDING. All payments required to be made by the Company hereunder
to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Company
may reasonably determine it must withhold pursuant to any applicable
law or regulation.
3. ASSISTANT TO THE EXECUTIVE. The Company agrees to continue to employ
Xxxxx Xxxxx (the "Assistant"), for a period of one (1) year commencing
on the Effective Date and continuing through and including December
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31, 1999 (the "Employment Period"), such employment to be for the sole
purpose of acting as an assistant to the Executive. The Company shall
employ the Assistant during the Employment Period at an annual base
salary rate of $85,000 and shall continue to maintain, in full force
and effect during the Employment Period, all benefits to which the
Assistant is entitled as of the Effective Date.
4. RESIGNATION. The Executive's resignation from the office of Chief
Executive Officer of the Company and from his positions as Chairman of
the Board and Managing Director shall be effective on the Effective
Date. The Executive shall not resign as a member of the Board of
Directors of the Company on the Effective Date.
5. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled exclusively by
single-arbitrator arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in
effect, and judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof.
6. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and
expenses, including but not limited to counsel fees, stenographer
fees, printing costs, etc., reasonably incurred by the Executive in
connection with the negotiation, execution and delivery of this
Agreement or in seeking in good faith to obtain any right or benefit
to which the Executive believes he is entitled under this Agreement.
Any amount payable under this Agreement that is not paid when due
shall accrue interest at the prime rate as from time to time in effect
at the Company's agent bank until paid in full.
7. NOTICES. Any notices required to be given under this Agreement shall
be in writing and shall be deemed given five (5) days after mailing in
the continental United States by registered or certified mail, or upon
personal receipt after delivery, telex, telecopy, or telegram, to the
party entitled thereto at the address stated below or to such changed
address as the addressee may have given by a similar notice:
TO THE COMPANY: Cyrk, Inc.
0 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
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Attn: President
WITH A COPY TO: Cameron Read, P.C.
Xxxxxx, Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
TO THE EXECUTIVE: Xxxxxxx X. Xxxxxxx
0 Xxxxxxxx Xxx
Xxxxxxxx, XX 00000
WITH A COPY TO: Xxxxxx X. Xxxx, Esq.
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
8. GENERAL PROVISIONS.
8.1. BINDING AGREEMENT. This Agreement shall be binding upon and inure to
the benefit of the parties and be enforceable by the Executive's
personal or legal representatives or successors if the Executive dies
while any amounts would still be payable to him hereunder, benefits
would still be provided to this family hereunder, or rights would
still be exercisable by him hereunder as if he had continued to live.
Such amounts shall be paid to the Executive's estate, such benefits
shall be provided to the Executive's family, and such rights shall
remain exercisable by the Executive's estate in accordance with the
terms of this Agreement. This Agreement shall not otherwise be
assignable by the Executive.
8.2. SUCCESSORS. This Agreement shall inure to and be binding upon the
Company's successors. The Company shall require any successor to all
or substantially of the business and/or assets of the Company by sale,
merger (where the Company is not the surviving corporation),
consolidation, lease or otherwise, by agreement in form and substance
satisfactory to the Executive, to assume this Agreement expressly.
This Agreement shall not otherwise be assignable by the Company. In
the event that it is impracticable for a successor of the Company to
perform the Company's obligations under paragraph 1.1(a), 1.1(b),
1.1(c), 1.1(f), l.l(g) and/or Section 3 of this Agreement, the Company
shall pay to the Executive, in a lump sum payment without
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discounting to present value, an amount equal to the aggregate of all
remaining payments due under such paragraph 1.1(a), 1.1(b), 1.1(c),
1.1(f), 1.1(g) and/or Section 3, as the case may be.
8.3. AMENDMENT OR MODIFICATION; WAIVER. This Agreement may not be amended
or modified unless agreed to in writing by the Executive and the
Company. No waiver by either party of any breach of this Agreement
shall be deemed a waiver of a subsequent breach.
8.4. SEVERABILITY. In the event that any provision of this Agreement shall
be determined to be invalid or unenforceable, such provision shall be
enforceable in any jurisdiction in which valid and enforceable, and in
any event the remaining provisions shall remain in full force and
effect to the fullest extent permitted by law.
8.5. RIGHTS GRANTED. This Agreement shall not give the Executive any right
to compensation or benefits from the Company or any Subsidiary, except
for the rights specifically stated herein, including those certain
severance and other benefits that become due as of the Effective Date.
8.6. GOVERNING LAW. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
9. EXCLUSIVE AGREEMENT. It is agreed and understood that this Agreement
represents the entire agreement between the Company and the Executive
concerning the subject matter hereof and, except as set forth in
paragraph l(f) hereof, supersedes all prior agreements and
understandings concerning the Executive's rights upon the termination
of his employment, including, without limitation, any change of
control agreement that may be in effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal
as of the day and year first above written.
Cyrk, Inc. Executive
By its Authorized Representative
By:
------------------------------------ -----------------------------------
Name: Xxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxx
Title: Chairman, Compensation Committee
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EXHIBIT A
DEFINITIONS
The following terms as used in this Severance Agreement have the following
meanings:
(a) "ACCOUNTANT BENEFIT" means the payment by the Company of certain expenses
in connection with accounting services provided to the Executive, at the
annual rate in effect on the Effective Date, which annual rate is $50,000.
(b) "Apartment Benefit" means, so long as the Company provides the use of an
apartment in New York City to executives of the Company, the payment by the
Company of certain expenses incurred in connection with the leasing of an
apartment in New York City for use by the Executive, including rent and
maintenance fees and cleaning and phone expenses, at the annual rate in
effect on the Effective Date, which annual rate is $92,900.
(c) "AUTOMOBILE BENEFIT" means the payment by the Company of certain expenses,
including rental, insurance, maintenance and fuel costs, in connection with
the leasing of automobiles used by the Executive, at the annual rate in
effect on the Effective Date, which annual rate is $35,000.
(d) "BASE SALARY" means the Executive's base salary, exclusive of any bonus or
other benefits he may receive, at the annual rate in effect on the
Effective Date, which annual rate is $300,000.
(e) "CLUB BENEFIT" means the payment by the Company of certain expenses
incurred in connection with club memberships for the Executive, at the
annual rate in effect on the Effective Date, which annual rate is $31,700.
(f) "COMPANY" means Cyrk, Inc. or any successor.
(g) "NEW YORK OFFICE BENEFIT" means, so long as the Company maintains an office
in New York, the use by the Executive of his New York office in the same
manner as he uses it as of the Effective Date, with payment by the Company
of all expenses incurred in connection with such office, including, without
limitation, rent, furniture, equipment and communications expenses.
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(h) "PHONE AND SUBSCRIPTION BENEFIT" means the payment by the Company of
expenses incurred in connection with a cellular phone and subscriptions to
periodicals provided to the Executive, at the annual rate in effect on the
Effective Date, which annual rate is $7,600.
(i) "SPECIAL CHILD CARE BENEFIT" means the payment by the Company of the salary
and fringe benefits for a special child care provider for the Executive's
son Xxxxxxx X. Xxxxxxx, at the annual rate of up to $25,000.
(j) "SUBSIDIARY" means any corporation in which the Company owns, directly or
indirectly, 50 percent (50%) or more of the total combined voting power of
all classes of stock.
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EXHIBIT B
====================================================================================================================================
Policy
Cyrk, Inc. Owner
Total Total Cash Cash
Insurance Product Policy Death Annual Date of Deposits Surrender Surrender
Name Carrier Type Number Benefit Premium Issue To Date Value Value
================== ============ ============ ======== =========== =========== ========= ============= ============= ========
------------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxx The Guardian Whole Life 3777007 4,248,669 74,936.00 15-Nov-94 456,942.40 370,777.00 0.00
Xxxxxxx X. Xxxxxxx Xxxx Xxxxxxx Whole Life 85240001 3,502,499 61,100.00 15-Nov-94 419,596.94 418,918.00 0.00
Xxxxxxx X. and Survivorship
Xxxxxx X. Xxxxxxx The Guardian Whole Life 3777006 4,211,222 42,349.00 15-Nov-94 258,528.30 155,709.00 0.00
Xxxxxxx X. and Survivorship
Xxxxxx X. Xxxxxxx Xxxx Xxxxxxx Whole Life 80099781 3,269,471 25,017.00 15-Nov-94 142,259.16 120,682.00 0.00
Xxxxxxx X. and Survivorship
Xxxxxx X. Xxxxxxx JHVLICO Variable
Life 20015822 20,000,000 211,850.00 26-Jun-97 667,119.00 603,186.00 0.00
----------- ----------- ------------- ------------- ------
$35,231,861 $435,261.00 $1,944,446.00 $1,669,272.00 $0.00
------------------------------------------------------------------------------------------------------------------------------------
Notes:
1. Cyrk, Inc. advances premiums for the acquisition of Life Insurance
coverage. Cyrk, Inc. will recover its advances at the death of the Insured
(or sooner, at the discretion of the policy owner).
2. Each participant is responsible for the income tax on the economic benefit
received from the arrangement.
3. Each policy owner is entitled to policy cash values to the extent that they
exceed the cumulative premiums paid by Cyrk, Inc.
4. Life Insurance death benefits are not subject to income tax.
5. JHVLICO is the abbreviation for Xxxx Xxxxxxx Variable Life Insurance
Company.
Winged Keel Group, Inc. December 1998 File No: 10849
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EXHIBIT B CONT'D
CYRK, INC.
SPLIT DOLLAR LIFE INSURANCE PLAN
PREPARED FOR XXXXXXX X. XXXXXXX
COMPOSITE
Single Life Second-to-die
----------------- ---------------------------
Xxxxxxx Total
Policy Guardian Xxxxxxx Guardian Xxxxxxx Variable Total Insurance
Year Age Premium Premium Premium Premium Premium Premium Carriers
------- --- -------- ------- -------- ------- -------- ------- ----------
1996-97 50 144,188 167,500 81,556 42,017 435,260 435,261 33,744,694
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 33,857,602
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 33,564,662
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 34,085,504
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 34,219,447
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 34,355,770
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 34,524,614
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 34,695,870
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 34,835,104
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 35,012,531
0000-00 00 00,936 61,100 42,349 25,017 231,859 455,261 35,202,277
2007-08 61 0 61,100 42,349 25,017 162,607 291,073 35,279,667
2008-09 62 0 61,100 0 0 106,400 167,500 35,314,515
2009-10 63 0 0 0 0 0 0 35,208,506
2010-11 64 0 0 0 0 0 0 35,130,904
Notes:
1. Assumes Xx. Xxxxxxx (D.O.B. 8/30/46) and Xxx. Xxxxxxx (D.O.B. 8/13/55) do
not smoke and are classified as preferred insurance risks.
2. Actuarial life expectancy for a 50 year old male insured is 31 years (based
on 1983 IAM mortality tables).
3. Actuarial life expectancy for a 43 year old female insured is 42 years (based
on 1983 IAM mortality tables).
4. Assumes acquisitions of survivorship insurance on the lives of Mr. and Xxx.
Xxxxxxx.
5. This spreadsheet is based on detailed illustrations provided by The Guardian
and Xxxx Xxxxxxx Life Insurance companies. The illustration is attached to
this summary spreadsheet. These projections make assumptions as to future
income as referred, mortality costs, and administrative expenses and is not
guaranteed. Actual results may be higher or lower than illustrated.
6. The contents of this report should not be considered the rendering of legal,
tax or investment advice. Clients are responsible for seeking all such advice
from their own legal counsel, accountants and investment advisors.
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EXHIBIT B CONT'D
CYRK, INC.
SPLIT DOLLAR LIFE INSURANCE PLAN
PREPARED FOR XXXXXXX X. XXXXXXX
COMPOSITE
Income
Policy Premium Cumulative Cash Insurance Statement
Year Age Expense Premium Value Coverage Effect
------- --- ------- ---------- ---------- ---------- ----------
1996-97 50 435,261 1,305,783 1,228,957 33,749,694 (42,984)
1997-98 51 435,261 1,741,044 1,558,723 33,857,802 (105,495)
1998-99 52 435,261 2,176,305 2,110,984 33,964,662 112,000
1999-00 53 435,261 2,611,566 2,585,870 34,085,904 39,625
2000-01 54 435,261 3,046,827 3,163,854 34,219,447 25,695
2001-02 55 435,261 3,482,088 3,780,911 34,365,778 0
2002-03 56 435,261 3,917,349 4,475,644 34,524,614 0
2003-04 57 435,261 4,352,610 5,218,418 34,695,978 0
2004-05 58 435,261 4,787,871 6,049,990 34,836,194 0
2005-06 59 435,261 5,223,132 6,969,177 35,012,531 0
2006-07 60 435,261 5,658,393 7,938,083 35,202,277 0
2007-08 61 291,073 5,949,466 8,911,033 35,279,667 0
2008-09 62 167,500 6,116,966 9,918,123 35,314,581 0
2009-10 63 0 6,116,966 10,746,520 35,208,506 0
2010-11 64 0 6,116,966 11,637,091 35,110,904 0
Notes:
1. Assumes Xx. Xxxxxxx (D.O.B. 8/30/46) and Xxx. Xxxxxxx (D.O.B. 8/13/55) do
not smoke and are classified as preferred insurance risks.
2. Actuarial life expectancy for a 50 year old male insured is 31 years (based
on 1983 IAM mortality tables).
3. Actuarial life expectancy for a 43 year old female insured is 42 years (based
on 1983 IAM mortality tables).
4. Assumes acquisitions of survivorship insurance on the lives of Mr. and Xxx.
Xxxxxxx.
5. This spreadsheet is based on detailed illustrations provided by The Guardian
and Xxxx Xxxxxxx Life Insurance companies. The illustration is attached to
this summary spreadsheet. These projections make assumptions as to future
income as referred, mortality costs, and administrative expenses and is not
guaranteed. Actual results may be higher or lower than illustrated.
6. The contents of this report should not be considered the rendering of legal,
tax or investment advice. Clients are responsible for seeking all such advice
from their own legal counsel, accountants and investment advisors.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal
as of the day and year first above written.
Cyrk, Inc. Executive
By its Authorized Representative
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------------ -----------------------------------
Name: Xxxxxx X. Xxxxxxxx Xxxxxxx X. Xxxxxxx
Title: Chairman, Compensation Committee
