SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made by, between and among,
Ugly Duckling Corporation, a Delaware corporation and its subsidiaries and
affiliates (collectively, the "Duck") and Xxxxxx X. Xxxxx ("Employee"),
effective January 31, 2002 (the "Effective Date").
Recitals
The parties acknowledge that the following recitals are true and correct
statements of fact and are relied upon by the parties in entering into this
Agreement:
1. Duck employed Employee on an at will basis as an executive officer and
employee of the Duck ("Employment").
2. Duck and Employee mutually seek to terminate the Employment and enter into
this Agreement.
NOW, THEREFORE, in consideration of covenants, representations and
warranties of the parties stated herein, and the performances of the parties
required hereby, Duck and Employee mutually agree as follows:
Section 1. Termination of Employment. Employee resigned as Chief Financial
Officer and Principal Accounting Officer of the Duck on January 31, 2002.
Beginning February 1, 2002 and through September 30, 2002, Employee shall have
the title, Senior Vice President --Director of Special Projects and on a limited
basis, as requested, Employee shall perform special projects for the Duck. The
Employment shall be fully and forever terminated as of September 30, 2002 (the
Termination Date"). Employee shall remain on the Duck's email and phone systems
through the Termination Date. After the Termination Date, Duck is not required
to employ or retain Employee in any manner or for any purpose at any time. After
the Termination Date, Employee is not required nor authorized to perform or
provide any Employment services in any manner or for any purpose at any time.
Employee shall refer all third party employment related requests to the Director
of Human Resources Administration for verification of information, for example,
title and salary. Employee's salary will be verified at his level prior to the
date of this Agreement. The Duck shall also provide a letter of reference for
Employee in substantially the form attached as Exhibit "A" upon request by
Employee, provided that at such time Employee is not default in the terms of
this Agreement. In the event that Employee becomes employed elsewhere prior to
the Termination Date, Employee shall provide at least two weeks prior written
notice to the Duck prior to commencing his new employment and the Duck and
Employee shall use their best, good faith efforts to smoothly transition any
outstanding projects Employee is working on. As long as Employee is not in
default of any material term or provision of this Agreement, Employee also shall
be entitled at that time to the payment of an amount equal to the difference
between what the Duck has paid Employee up to the date Employee's employment
with the Duck ends and $89,583.00.
Section 2. Severance Payment/Benefits
(a) Payments/Benefits. Provided this Agreement is not revoked by Employee
during the Revocation Period (as hereinafter defined), Duck agrees to pay to
Employee a monthly salary of $11,200 per month beginning February 1, 2002
through and including the Termination Date. Provided, however, that Employee
acknowledges that since February 1, 2002 Employee has been paid $4,650 more than
what would have been paid at the rate of $11,200/month. As a result, Employee
agrees that the Duck may deduct from each paycheck starting with the second
paycheck in March a pro rated amount of the overpayment such that on the final
payment date the $4,650 overpayment shall be eliminated. Such payments shall be
made periodically at the same time as and with the Duck's normal payroll, with
any final, prorated payment being made on or about September 30, 2002. Employee'
current welfare benefits (including, without limitation, medical, prescription
and dental) shall continue through and including the Termination Date
("Termination Payment"). Duck shall withhold from the Termination Payment all
employment related taxes as required by law and other normal and customary
deductions. The benefits continuation for welfare benefits shall be provided in
accordance with Duck's normal benefits schedule, including any normal and
customary deductions for employee contributions for such benefits.
(b) No Other Payments Due. Except as otherwise set forth in this Section,
no other compensation, salary, bonus, benefit or other consideration shall be
payable by Duck to Employee. Subject to the obligations of Duck set forth in
this Agreement, Employee acknowledges the full satisfaction and discharge of any
and all obligations of Duck for payment of any wages, benefits, costs, fees or
other amounts to Employee at any time in connection with the Employment and/or
the termination of the Employment. Employee shall not at any time file, and
hereby forever waives, any claims for unemployment benefits in connection with
the termination of the Employment. No payment hereunder relates to any welfare
benefit plan (as that term is defined in the Employee Retirement Income Security
Act) providing benefits upon termination of employment or contributions to such
plans.
(c) Stock Options. Employee and Duck agree that all options currently
outstanding in favor of Employee for the purchase of stock of the Duck, whether
vested or not vested, and the Stock Option Agreements relating to these grants,
shall terminate and lapse as of the Effective Date.
(d) Attorneys' Fees. Duck and Employee shall pay and be responsible for
their respective attorneys' fees, if any, related to the Employment, any dispute
relative to the Employment, severance or termination of Employment, and the
review and negotiation of this Agreement.
Section 3. Duck Property. Employee represents and warrants that as of the
Termination Date Employee will surrender to Duck, and will not retain possession
of, any information, materials or property of Duck, regardless of the medium or
form (e.g., writing, recording, hardrive, disk, CD) or wherever located (e.g.,
personal computer, files, home, storage), including but not limited to
confidential and/or proprietary information of or about Duck (e.g., business
plans, financial information, budgets, forecasts, manuals, training materials,
phone lists, personnel information), keys, passes, credit cards, cellular
telephone, beepers, equipment, computers, disks, or files. Duck will also
reimburse to Employee all business related expenses incurred by Employee prior
to the Termination Date in accordance with Duck's current reimbursement policy.
Employee shall submit any such expenses for reimbursement no later than October
15, 2002 or Duck shall not reimburse such expenses. Up to and including the
Termination Date, Employee shall retain the use of the computer equipment in his
former office, his cellular telephone, and his driver (the "Personal Property").
Employee shall have the right to retain the Personal Property after the
Termination Date at no cost to Employee, except that if Employee wishes to
retain the driver Employee agrees to pay the Duck, on or before the Termination
Date, an amount equal to the driver's Xxxxx Bluebook wholesale value. To the
extent space is reasonably available and subject to the approval of the
President/CEO, Employee shall also have a cubicle at the Duck's corporate
headquarters where Employee may perform certain limited clerical functions and
pick up mail.
Section 4. Confidentiality. Neither Employee nor Duck shall disclose the terms
of this Agreement at any time except as agreed to between the parties and for
disclosures to their respective counsel, Employee's spouse and Employee's
financial advisors, disclosures required by law or judicial process and
disclosures to respond to legitimate inquiries of third parties regarding
Employee's employment with Duck as set forth herein.
Except with Duck's prior written approval or as may be required by law or
judicial process, Employee shall forever maintain the confidentiality of all
nonpublic information regarding Duck and its businesses, directors, officers,
employees and representatives. Duck shall make good faith efforts to ensure that
any information regarding Employee distributed by Duck, its directors and
officers shall be strictly limited to confirmation of Employee's employment by
Duck and the information that may be disclosed pursuant to this Section, as more
particularly described in Section 1 of this Agreement. Employee shall not make
negative or disparaging remarks about Duck or its personnel, and shall take no
actions intended or designed to damage or harm the Duck. The Duck shall not make
negative or disparaging remarks about Employee and shall take no actions
intended or designed to damage or harm Employee. Employee also shall not contact
Duck employees regarding Duck business after the Termination Date, unless
approved by the President of Duck. For purposes of this Section, nonpublic
information shall mean information that has not been published and is not
generally available to the public.
Section 5. Remedies.
(a) General. Employee and Duck each acknowledge that the other party will
incur substantial, irreparable, immediate and continuing harm if any of the
covenants of Employee or Duck stated in Sections 4 are materially violated and
that monetary awards will not be adequate remedies for the material violations.
Therefore, Employee and Duck each acknowledge and agree that, in the event of
material violations, equitable remedies are appropriate and may be granted,
including without limitation, restraining orders and injunctions, all in
addition to monetary awards. Further, Employee and Duck each acknowledge that
Employee and Duck are relying on each party's strict compliance with all
covenants in Sections 4 and 5 in agreeing to all other terms and conditions of
this Agreement.
(b) Breaches. In the event that Employee is in default under the terms of
this Agreement, Duck may, in its sole and absolute discretion and in addition to
any other remedies Duck may have, discontinue the Termination Payments beginning
as of the date of the default(s). In the event that Duck is in breach under this
Agreement, in addition to any other remedies Employee may have, Employee may
immediately discontinue working on any projects or other work as provided for
hereunder for the Duck.
Section 7. Mutual Releases and Lawsuits.
7(a). Employee Release: In consideration of the terms and conditions
hereof, including the payment and provision of the Termination Payment, and
except for those obligations created by or arising out of this Agreement,
Employee agrees to release, waive and discharge any and all claims, causes of
action and liability against Duck, or any officer, director, agent or employee
of Duck, in any way relating to this Agreement and Employee's Employment or
termination of Employment with Duck, and all claims, if any, related to
Employee's existing, ongoing or additional equity or other interests in the
Duck, whether now known, knowable or unknown, and whether presently existing,
presently known or hereafter discovered. Employee expressly waives and releases
any and all rights which Employee may have under the provisions of any
applicable laws to the effect that a general release does not extend or apply to
claims a person does not know or suspect to exist at the time of granting the
release, which if known, would materially affect its granting of the release.
This release, waiver and discharge also includes, without limitation, any claims
arising under the Age Discrimination in Employment Act of 1967, the Civil Rights
Act of 1964 and 1991, the Labor Management Relations Act, the Americans with
Disabilities Act, the Fair Labor Standards Act, any applicable state or Federal
constructive discharge or wage payment statutes or laws, the Equal Pay Act, the
Family and Medical Leave Act, the National Labor Relations Act, the
Rehabilitation Act of 1973, the Consolidated Omnibus Budget Reconciliation Act,
any applicable state civil rights act, any applicable state or federal laws or
regulations related to retaliation or whistleblower activities, any other
federal or state statute, regulation or local rule, ordinance or any other
common law cause of action including without limitation claims for breach of
contract (actual, implied or otherwise, but other than related to this
Agreement), any amendments to any of the foregoing acts, statutes, laws,
regulations, rules or ordinances, wrongful discharge, discrimination,
negligence, negligent discharge, constructive discharge, misrepresentation,
personal injury or any claim for attorneys' fees, libel, slander, intentional or
negligent infliction of emotional distress, tortious interference with contract,
reinstatement, and failure to pay wages, bonuses or other benefits.
EMPLOYEE UNDERSTANDS AND AGREES THAT THE FOREGOING RELEASE TERMINATES AND ENDS
ALL DISPUTES, CLAIMS AND LIABILITIES AGAINST AND INVOLVING DUCK EXCEPTING ONLY
THE OBLIGATIONS SET FORTH IN THIS AGREEMENT.
7(b). Employer Release. Except for those obligations created by or arising
out of this Agreement, Duck hereby acknowledges full and complete satisfaction
of and releases and discharges, and covenants not to xxx, the Employee from and
with respect to any and all claims, agreements, obligations, debts, losses,
damages, injuries, demands and causes of action, known or unknown, suspected or
unsuspected, arising out of or in any way connected with the Employee's
employment relationship with or termination or separation from Duck, or any of
the occurrences, acts, omissions or claims whatever, known or unknown, suspected
or unsuspected, which Duck now owns or holds or has at any time heretofore owned
or held as against the Employee.
Neither release in this Agreement shall be effective until the Effective Date.
7(C) Lawsuits. Employee also agrees not to bring any lawsuit or proceeding
against Duck for any matter arising out of the Employment or separation from
employment. Employee understands that this Agreement precludes Employee from
recovering any relief as a result of any charge, claim, lawsuit, or proceeding
brought by Employee or on Employee's behalf arising out of Employee's employment
with Duck or separation from that employment. Employee and Duck acknowledge
that, notwithstanding any other provision of this Agreement, Employee may file a
lawsuit or bring a claim to challenge the validity of this Agreement under the
federal Age Discrimination in Employment Act, as amended, as long as any such
challenge by Employee is done in good faith.
Section 8. Revocation Period. Employee may revoke this Agreement for a period of
seven (7) calendar days following the date of the execution of this Agreement
(the "Revocation Period") by delivery of written notice of revocation to Xxx
Xxxxxxxx, General Counsel, Ugly Duckling Corporation, 0000 X. Xxxxxx Xxxxxx
Xxxx, Xxxxxxx, Xxxxxxx 00000. This Agreement shall be effective and enforceable
on the expiration of the Revocation Period, provided Employee does not revoke
this Agreement during the Revocation Period (the "Effective Date"). Employee
acknowledges that Employee has been given a period of twenty-one (21) days to
consider whether to sign this Agreement.
Section 9. Reliance. Employee warrants and represents that: (i) Employee has
relied on Employee's own judgment regarding the consideration for and language
of this Agreement; (ii) Employee has been given a reasonable period of time to
consider said Agreement; (iii) Employee has been advised to consult with counsel
of Employee's own choosing before signing this Agreement; (iv) no statements
made by Duck have in any way coerced or unduly influenced Employee to execute
this Agreement; and (v) this Agreement is written in a manner that is
understandable to Employee and Employee has read and understands all paragraphs
of this Agreement.
Section 10. Arbitration. Other than a breach or threatened breach of Sections 4
or 5 hereof, any dispute, controversy, or claim, whether contractual or
non-contractual, between the parties hereto arising directly or indirectly out
of or connected with Employee's employment by Duck, this Agreement, or relating
to the breach or alleged breach of any representation, warranty, agreement, or
covenant under this Agreement, unless mutually settled by the parties hereto,
shall be resolved by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ("AAA"). Any
arbitration shall be conducted by arbitrators approved by the AAA and mutually
acceptable to Duck and Employee. All such disputes, controversies, or claims
shall be conducted by a single arbitrator, unless the dispute involves more than
$50,000 in the aggregate in which case the arbitration shall be conducted by a
panel of three arbitrators. If the parties hereto are unable to agree on the
arbitrator(s), then the AAA shall select the arbitrator(s). The resolution of
the dispute by the arbitrator(s) shall be final, binding, nonappealable, and
fully enforceable by a court of competent jurisdiction under the Federal
Arbitration Act. The arbitrator(s) shall award compensatory damages to the
prevailing party. Except as otherwise required by law, the arbitrator(s) shall
have no authority to award consequential or punitive or statutory damages, and
the parties hereby waive any claim to those damages to the fullest extent
allowed by law. The arbitration award shall be in writing and shall include a
statement of the reasons for the award. The arbitration shall be held in
Phoenix, Arizona. The arbitrator(s) shall award reasonable attorneys' fees and
costs to the prevailing party.
Section 11. Severability; Reformation. In the event any court or arbiter
determines that any of the restrictive covenants in this Agreement, or any part
or provision of this Agreement, is or are invalid or unenforceable, the
remainder of the restrictive covenants and terms and conditions of this
Agreement shall not thereby be affected and shall be given full effect, without
regard to invalid portions. If any of the provisions of this Agreement should
ever be deemed to exceed the temporal, geographic, or occupational limitations
permitted by applicable laws, those provisions shall be and are hereby reformed
to the maximum temporal, geographic, or occupational limitations permitted by
law. In the event any court or arbiter refuses to reform this Agreement as
provided above, the parties hereto agree to modify the provisions held to be
unenforceable to preserve each party's anticipated benefits thereunder.
Section 12. General Matters. This Agreement shall be governed and construed in
accordance with the laws of the State of Arizona and any actions brought in
connection with this Agreement that are not subject to the arbitration
provisions of Section 10 above shall be brought and prosecuted in a court of
competent jurisdiction in Maricopa County, Arizona as the court of exclusive
jurisdiction and proper venue. The terms and conditions of this Agreement
represent the results of negotiations between the parties; is entered into after
full investigation by each party; and this Agreement is the entire Agreement
among the parties regarding the subject matter hereof. This Agreement supersedes
any and all prior or contemporaneous agreements, understandings, representations
or warranties, whether written or oral and whether express or implied between
Duck and Employee regarding the subject matter hereof. This Agreement may not be
changed orally, but only by an agreement in writing signed by the parties.
Section 13. Remedies. In the event of default or breach by either party, any and
all remedies set forth in the above paragraphs are intended to be nonexclusive
and either party may, in addition to said remedies, seek any additional remedies
available either in law or in equity. Additionally, in the event of litigation
or any other legal proceeding, including arbitration, relating to this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees
and costs of suit.
Section 14. Force Majeure. Neither Duck nor Employee shall be considered to be
in default in the performance of their respective obligations hereunder if
failure of performance shall be due to uncontrollable forces, which by the
exercise of due diligence and foresight such party cannot reasonably have been
expected to avoid and which by the exercise of due diligence it shall be unable
to overcome. A party rendered unable to fulfill any obligation by reason of
uncontrollable forces shall exercise due diligence to remove such inability with
all reasonable dispatch.
Section 15. Attorney. Employee acknowledges that Employee has consulted, or has
had an opportunity to consult, with an attorney of Employee's choice prior to
executing this Agreement.
By signing this Agreement, each party acknowledges that it has received,
read and accepted all terms and conditions of this Agreement, all effective as
of the Effective Date.
DUCK: Ugly Duckling Corporation,
a Delaware corporation
By: __________________________________
Name: __________________________________
Its: __________________________________
EMPLOYEE: _______________________________________
Xxxxxx Xxxxx
EXHIBIT "A"
To Whom It May Concern:
Xxxxx Xxxxx has worked with Ugly Duckling Corporation as a Senior Vice President
and Chief Financial Officer and has been a significant part of our senior
management team from February 1994 until January 2002. Since our company went
private in February 2002 he has focused on the many special projects and
financial analysis needs that a retail/finance company like ours requires. His
CFO responsibilities included management of all of finance, accounting,
treasury, investor relations and financial reporting for our public Corporation
and its subsidiaries. During his tenure as CFO we grew from eight dealerships in
Arizona with less than $20 million in assets to 76 dealerships nationwide with
assets exceeding $600 million, including a $500 million consumer loan portfolio.
Xxxxx was instrumental in three successful public stock offerings whereby the
Company raised over $180 million in new equity capital. Further, he also worked
with numerous professionals as we completed more than 20 loan securitizations,
securitizing over $1 billion in consumer loans. During the course of his
employment, Xxxxx has proved himself to be an exceptional employee, hard worker,
innovative thinker and a talented leader.
I have been consistently impressed by Steve's ability to think out of the box,
manage multiple priorities and meet reporting and other timelines. He also has a
comprehensive understanding of management and data processing systems and has
leveraged this knowledge into ongoing system and process enhancements that save
money, improve productivity or both. His forthright manner and broad scope of
experience has added value to the team and is generally appreciated by all.
Overall, Xxxxx is a very conscientious, energetic, of high integrity and an
outstanding individual. He has what it takes to be a member of senior management
on any team. We will miss Xxxxx and I highly recommend him for whatever position
he may decide to pursue.
Sincerely,
X.X. Xxxxxx
Chairman of the Board
