EXHIBIT 10.1
SETTLEMENT AND SEPARATION AGREEMENT
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This Settlement and Separation Agreement ("Agreement"), executed on
the 18th day of October, 2001, between CD Warehouse, Inc., (the "Company") and
Xxxxx X. Xxxxxxx ("Xxxxxxx"), is effective as of October 5, 2001 ("Effective
Date"), and is intended to effect the settlement and extinguishment of disputes,
differences, claims and obligations as herein designated, provide for the
separation of Xxxxxxx from the employment of the Company, and establish the
severance compensation and benefits from the Company to Xxxxxxx.
RECITALS
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1. Disputes and differences have arisen between the parties with
respect to the matters, duties, and obligations in connection with that certain
Employment Agreement dated October 26, 1996, as amended by the First Addendum To
The Xxxxxxx Employment Agreement dated August 30, 2000 (sometimes collectively
referred to herein as the "Employment Agreements"), between the Company and
Xxxxxxx.
2. The parties have agreed to execute this Agreement in settlement
of such disputes and differences in connection with the Employment Agreements,
and by the execution of this Agreement the parties intend to effect the
cancellation of the Employment Agreements, provide for certain continuing duties
and obligations between the parties, and set forth the severance compensation
and benefits from the Company to Xxxxxxx.
3. The signatories hereof represent that they are authorized and
empowered to execute this Agreement on behalf of their respective parties.
In consideration of the mutual covenants contained herein, the
Company and Xxxxxxx agree as follows:
COVENANTS OF THE COMPANY
4. The Company will pay to Xxxxxxx bi-monthly severance
compensation payments (the "Severance Compensation Payments") for thirty (30)
months (the "Severance Period") salary at the annualized rate of $120,000.00,
minus all taxes and withholdings required by law (the "Severance Pay"). The
Severance Compensation Payments shall commence on October, 19, 2001, the first
normal pay period following the Effective Date; and shall be made in the
ordinary course of the Company's payroll without exception or special
consideration to Xxxxxxx.
5. The Company will pay on behalf of Xxxxxxx, for a period of
eighteen (18) months from the Effective Date, his Cobra payments for
continuation coverage for the group life, hospitalization, medical, dental,
health, accident or disability insurance ("Group Insurance") the Company
provides to its then current Officers during the first eighteen (18) months of
the Severance Period. Xxxxxxx shall not be entitled to any benefits, expenses,
other "perks" or pay that Xxxxxxx previously enjoyed as an employee of the
Company, other than the Severance Pay and Cobra payments to be made on behalf of
Xxxxxxx for Group Insurance.
6. Indemnification. (a) Right to Indemnification. During the
Severance Period, the Company will indemnify Xxxxxxx and hold him harmless from
and against any claim, loss or cause of action arising from or out of Xxxxxxx'x
performance as an officer, director, or employee of the Company or its
subsidiaries, if any, or in any other capacity, including any fiduciary
capacity, in which Xxxxxxx served at the request of the Company to the maximum
extent permitted by the Delaware General Corporation Act and the Company's
Certificate of Incorporation and By Laws ("Governing Documents"), provided that
in no event will the protection afforded to Xxxxxxx hereunder be less than that
afforded under the Governing Documents as in effect on the Effective Date of
this Agreement.
(b) Culpable Action:
(i) Notwithstanding the provisions of Paragraph 6(a), Xxxxxxx will not be
entitled to indemnification if (A) the Company is prohibited from paying
such indemnification under applicable law, or (B) Xxxxxxx'x actions or
omissions involved intentional misconduct or knowing violation of law (any
existence or occurrence described in the foregoing clauses (A) and (B),
individually, is a "Culpable Action").
(ii) The existence or occurrence of a Culpable Action will be conclusively
determined by a non appealable, final decision of the court having
jurisdiction over the applicable proceeding. Such determination will be
final and binding upon the parties hereto.
(iii) If a proceeding involves more than one claim, issue or matter, the
determination as to whether a Culpable Action exists or has occurred will
be severable as to each and every claim, issue and matter.
(iv) The termination of any proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, does not
affect the provisions of Paragraph 6(a) for indemnification hereunder and
does not create a presumption that there exists a Culpable Action.
7. The Company hereby withdraws and cancels its letters and notices
regarding the termination of Xxxxxxx'x employment dated September 13, 2001;
September 25, 2001; and October 1,2001.
8. The Company will release Xxxxxxx as set forth in the mutual release
contained herein.
COVENANTS OF XXXXXXX
9. Xxxxxxx agrees to be bound by the following terms of confidentiality,
non-competition,
and non-solicitation provisions, for a period of thirty (30) months from the
Effective Date.
10. Confidentiality. Without the prior written consent of the Company,
except to the extent required by an order of a court having competent
jurisdiction or under a subpoena from an appropriate government agency, Xxxxxxx
will not communicate or disclose to any third person, or use for the benefit of
himself or any third person, (a) trade secrets, customer or supplier lists or
information, marketing plans, sales plans, management organization information
(including data and other information relating to members of the Board and
management), operating policies or manuals, business plans, processes and
techniques, financial records, or other financial, commercial, or business
information relating to the Company or its investors or the purchase and sale of
its securities or any of its subsidiaries, or (b) information designated as
confidential or proprietary that the Company or its subsidiaries, if any, may
receive from its suppliers, customers or others who do business with the Company
or any of its subsidiaries (collectively, "Confidential Information") to any
third person unless such Confidential Information has been previously disclosed
to the public by the Company or is in the public domain (other than by reason of
Xxxxxxx'x breach of this Paragraph).
11. Competition with The Company. Xxxxxxx agrees that during the term of
the Severance's Period he will not, directly or indirectly, for his own benefit
or on behalf of others, compete with, or be an officer, director, employee or
holder of more than 5% of the capital stock or other equity interest of any
corporation or other entity which competes with the Company or any of its
subsidiaries as of the Effective Date ("Competitive Activity"). The limitations
imposed by this Paragraph will extend to all geographic areas in which the
Company conducts business as of the Effective Date.
12. Xxxxxxx resigns as Chairman Emeritus of the Company as of the
Effective Date.
13. Xxxxxxx will release the Company as set forth in the mutual release
contained herein.
ADDITIONAL TERMS
14. Mutual Release. In consideration of the mutual relinquishment of
their respective legal rights with reference to the above-mentioned disputes,
differences, and Employment Agreements, and in consideration of the execution of
this Agreement, each party, for himself or itself and their officers, agents,
employees, assigns, heirs, and any predecessors or successors in interest,
expressly releases the other and their officers, agents, employees, assigns,
heirs, and any predecessors or successors in interest from any and all
obligations, duties, warranties, claims, demands, disputes, and any liability
related thereto, arising out of, or in connection with, the above-described
disputes, differences, and Employment Agreements.
15. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement will be resolved by binding arbitration. The
arbitration will be held in the city of Oklahoma City, Oklahoma and except to
the extent inconsistent with this Agreement, will be conducted in accordance
with the Rules of the American Arbitration Association then in effect at the
time of the arbitration, and otherwise in accordance with principles which would
be applied by a court of law or equity. The arbitrator will be acceptable to
both the Company and Xxxxxxx. If the parties cannot agree on an acceptable
arbitrator, the dispute will be heard by a panel of three arbitrators one
appointed by each of the parties and the third appointed by the other two
arbitrators.
16. Nothing in this Agreement shall affect Xxxxxxx'x stock options
regarding the Company, and Xxxxxxx shall retain all stock options previously
granted.
17. The parties acknowledge that the e-commerce business model, for
which the Company has pursued a patent and/or other intellectual property
protection, was devised by and is the sole idea
of Xxxxxxx. Xxxxxxx may hold himself out as the inventor of the e-commerce
business model and/or may use the same in any books or other publications and is
hereby granted a non-exclusive license for such purpose, which he may freely
grant to others as he sees fit.
18. The Company and Xxxxxxx agree that they are entering into this
Agreement as a compromise of disputed claims. By entering into this Agreement,
no fault, liability, or wrongdoing is admitted.
19. The covenants of this Agreement shall be specifically
enforceable. In the event that either party shall file an action to enforce the
obligations imposed on the other party, the prevailing party shall be entitled
to its costs and expenses, including a reasonable attorney's fee, incurred in
connection with enforcement of such obligations.
20. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their successors, assigns, heirs, and personal
representatives.
21. The validity, construction and enforcement of this Agreement
shall be governed by the laws of the State of Oklahoma without reference to
principles of conflicts of law or choice of law.
22. This Agreement embodies the entire agreement between the
parties hereto with respect to the matters involved herein and supersedes any
previous negotiations or agreements between the parties. This Agreement was not
executed in reliance upon any statement or representation by either party other
than those set forth herein. This Agreement may not be modified or amended
except by a subsequent agreement in writing signed by all parties.
23. The Parties agree that as of October 5, 2001, the Employment
Agreements shall be canceled and terminated, and all duties, obligations, and
liabilities with respect thereto shall cease.
24. The parties agree that they shall hold the terms of this
Severance and Separation Agreement confidential, and will not divulge the terms
of the same to any third party except as
required by law or for the purposes of reporting taxes. The parties shall
refrain from making any public statements regarding the separation of Xxxxxxx
from the employment of the Company, but to the extent any statement is
necessary, the parties shall state only that the Company and Xxxxxxx reached a
mutually beneficial and amicable agreement regarding the expiration of Xxxxxxx'x
employment with the Company, or words to that effect.
25. The invalidity or unenforceability of any particular provision
of this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
26. Agreement may be executed in counterparts.
In witness whereof, the parties have executed this Settlement and
Separation Agreement on the date first above written.
NOTE: READ THIS AGREEMENT CAREFULLY BEFORE SIGNING; IT CONTAINS A RELEASE OF
CLAIMS.
Xxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
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CD Warehouse, Inc.
By: /s/ Xxxxxxxxxxx X. Xxxxxx
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Xxxxxxxxxxx X. Xxxxxx, Chairman
