SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (the "Agreement") made as of the 1st day of
August, 1997 by and between Family Bargain Corporation, a Delaware corporation
(the "Company") and Xxxxxxx X. Xxxxxxx ("Xxxxxxx").
W I T N E S S E T H
WHEREAS, the Company and Mowbray are currently parties to the following
agreements:
(i) an Amended and Restated Employment Agreement dated February 24,
1997 (which replaced and superseded an Employment Agreement dated as of
November 1, 1996) (the "Employment Agreement"); and
(ii) Options to purchase One Hundred Ten Thousand (110,000)
shares of common stock of the Company at $1.375 per share expiring ten (10)
years after issuance ("First New Options"); and
(iii) a Secured Promissory Note and related agreement dated
March 21, 1997 (the "Note"); and
(iv) Options to purchase Six Hundred Seventeen Thousand (617,000)
shares of common stock of the Company at $2.25 per share expiring five (5) years
after issuance, which become exercisable in twenty-five percent (25%)
installments at such time as the market price of common stock of the Company
exceeds $6, $7.50, $10 and $15 per share for sixty (60) consecutive trading days
(the "Class A Second New Options"); and
(v) Options to purchase Thirty-Five Thousand Five Hundred (35,500)
shares of common stock of the Company at $2.25 per share expiring five (5) years
after issuance and currently exercisable (the "Class B Second New Options"); and
WHEREAS, Mowbray is a member of the Board of Directors of the Company; and
WHEREAS, the parties desire that:
(i) Mowbray resign from the Board of Directors of the Company and
as an officer of the Company;
(ii) the Employment Agreement be terminated;
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(iii)Mowbray agree not to compete with the Company (the
"Non-Competition Agreement"); and
(iv) the Note and Class A Second New Options be modified as herein
set forth,
all of the foregoing transactions to be in accordance with the terms hereinafter
set forth.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereby agree as follows:
1. Resignation as Director and Officer. Effective upon the execution of
this Agreement by both parties, Mowbray resigns as a Director of the Company and
as an officer of the Company and as a director and/or officer of any subsidiary
of the Company for which he presently serves in such capacity.
2. Termination of the Employment Agreement. Effective upon the
execution of this Agreement by both parties, the Employment Agreement shall be
terminated and be of no further force or effect and the rights and obligations
of the parties thereunder shall be as set forth herein.
3. Non-Competition Agreement. In consideration of the payments to be
made by the Company pursuant to Paragraph 4A below, Mowbray agrees that from the
date of this Agreement until December 31, 2000, he will not, directly or
indirectly, (a) compete with the Company, or any direct or indirect subsidiary
of the Company, in the operation of a retail bargain clothing store or chain of
such stores which markets products to low income consumers in the States of
California, Arizona, New Mexico, Washington, Oregon, Texas and such other states
in which the Company is operating on the date hereof; or (b) be interested in,
employed by, engaged by, or participate in the ownership, management, operation,
or control of, or act in any advisory or other capacity for, any firm or
corporation which competes with the Company in the States of California,
Arizona, New Mexico, Washington, Oregon, Texas and such other states in which
the Company is operating on the date hereof (provided, however, that
notwithstanding the foregoing, Mowbray may make solely passive investments in
any corporation the common stock of which is Apublicly held,@ and of which
Mowbray shall not own or control securities which constitute more than one
percent (1%) of the voting rights or equity ownership of such corporation); or
(c) solicit or divert business from the Company or assist any person, firm or
corporation in doing so or attempting to do so; or (e) hire any person employed
on a full-time basis by the Company on the date hereof, or any person who was a
full-time employee of the Company within six (6) months from the date hereof, or
assist any person, firm or corporation in doing so or attempting to do so.
4. Consideration to Mowbray. A. In consideration of the Non-Competition
Agreement, the Company shall pay to Mowbray the sum of Nine Hundred Seventy
Thousand Dollars ($970,000) payable as follows:
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(i) Three Hundred Sixty Thousand Dollars ($360,000) on March 30,
1998; and
(ii) Three Hundred Sixty Thousand Dollars ($360,000) on March 30,
1999; and
(iii)Two Hundred Fifty Thousand Dollars ($250,000) on August 1, 2001.
B. In consideration for the termination of the Employment Agreement,
the Company shall pay to Mowbray:
I. (i) upon execution of this Agreement, the gross sum of $44,767.50
which is equal to $1,313.60 per day multiplied by the number of accrued and
unused vacation days as of the date hereof; and
(ii) from the date hereof until December 31, 1997, the pro rata
portion of Three Hundred Forty-One Thousand Five Hundred Thirty-Six Dollars
($341,536) payable in biweekly installments on the normal payroll cycle of the
Company; and
(iii) from January 1, 1998 to December 31, 1998, the sum of Three
Hundred Sixty-Five Thousand Four Hundred Forty-Four Dollars ($365,444) payable
in biweekly installments on the normal payroll cycle of the Company; and
(iv) on or about February 28, 1998, the bonus due, if any, under
the Company's existing bonus plan for the fiscal year ending January 31, 1998,
pro rated to the date hereof; and
(v) from January 1, 1999 to December 31, 1999, the sum of Three
Hundred Ninety-One Thousand Twenty-Five Dollars ($391,025) payable in biweekly
installments on the normal payroll cycle of the Company; and
(vi) from January 1, 2000 to January 31, 2000, the pro rata share
of Four Hundred Eighteen Thousand Three Hundred Thirty-Six Dollars ($418,396)
payable in biweekly installments on the normal payroll cycle of the Company.
II. Each of the payments described in subparagraph BI above shall be
subject to standard deductions for taxes and other withholding items. In the
event of a "Change in Control" (as that term is defined in the Employment
Agreement), all amounts payable under subparagraphs A and B of this Paragraph 4
shall become immediately due and payable.
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C. The Company shall continue to provide to Mowbray, all of the benefits
described in Sections 3.01, 3.04 and 3.05 of the Employment Agreement, which
provisions are incorporated herein by reference as if set forth in full, for the
five (5) year period commencing on August 1, 1997 and ending July 31, 2002. In
the event of Mowbray's death prior to the end of such five (5) year period, his
spouse shall continue to receive such benefits until July 31, 2002.
D. Amendment of Note. The Note is hereby amended to forgive and waive all
interest payable thereunder.
E. Stock Options. The First New Options and the Class B Second Options
shall continue to be exercisable by Mowbray in accordance with their
respective terms. The Class A Second New Options are hereby amended so that
Mowbray can exercise fifty percent (50%) thereof at such time as the market
price of the common stock of the Company exceeds $6 per share for sixty (60)
consecutive trading days and fifty percent (50%) at such time as the market
price of the common stock of the Company exceeds $7.50 per share for sixty (60)
consecutive trading days.
4. Representations and Warranties by Mowbray. Mowbray hereby represents and
warrants as follows:
(i) That he is not aware of any claims or causes of action
which are pending or threatened against him in his capacities as a director,
officer or employee of the Company or any subsidiary thereof.
(ii) That he is not aware of any material claims or causes of
action which are pending or threatened against the Company which have not been
disclosed to the Company.
5. Representations and Warranties by the Company. The Company hereby
represents and warrants as follows:
(i) That the Company has full power and authority to
consummate the transactions contemplated by this Agreement; this Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms; that neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated herein,
will violate any agreement to which the Company is a party or by which it or any
of its property or assets is bound, or any law, order, decree or judgment
applicable to the Company, or any provision of its Amended and Restated
Certificate of Incorporation or Restated Bylaws, and that no authorization,
approval or consent of any third party is required for the lawful execution,
delivery and performance of this Agreement by the Company; and
(ii) That the execution, delivery and performance of this
Agreement and the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company.
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6. Indemnification by the Company. a) The Company agrees to indemnify
and hold harmless Mowbray against any claims, losses, costs (including, without
limitation, legal, witness and expert fees and disbursements and other charges
of counsel (collectively "Legal Fees"), expenses, liabilities, or damages in
connection with any claims or actions arising from or related to any of the
transactions consummated or contemplated pursuant to this Agreement (but not
legal fees relating to the transactions themselves), excluding federal, state
and local taxes (including interest, penalties and associated expenses) imposed
on Mowbray with respect to payments received by him pursuant to the transactions
consummated or contemplated by this Agreement, which shall be the sole
responsibility of Mowbray; or arising from or relating to any misrepresentation
or breach of any covenant, warranty or agreement made by the Company, or in
connection with the enforcement of this paragraph.
b. The indemnification set forth above shall be in addition
to, and without limiting or affecting, the Company's imdemnification obligations
pursuant to the Company's Articles of Incorporation and Amended and Restated
Bylaws (the "Bylaws"), provided, however that the Company further agrees that,
notwithstanding Section 5 of the Bylaws (provided that an undertaking of
repayment of expenses required by such Section 5 is given to the Company), any
expenses incurred by Mowbray defending any civil, criminal, administrative or
investigative action, suit or proceeding, or threat thereof, including without
limitation any claims or actions contemplated by this Paragraph 6, shall be paid
by the Company in advance of the final disposition of such action, suit or
proceeding, to the fullest extent permissible under the Company's Bylaws and
Delaware law.
7. Indemnification by Mowbray. Mowbray agrees to indemnify and hold
harmless the Company from and against any claims, losses, costs (including Legal
Fees), expenses, liabilities or damages arising from or relating to any
misrepresentation or breach of any covenant, warranty or agreement made by him
in this Agreement or connection with the enforcement of this Paragraph 7 and
from and against any liability for withholding taxes pursuant to federal, state
and local law (including interest, penalties and reasonable attorneys' fees)
with respect to any amounts payable to Mowbray under this Agreement or the
Non-Competition Agreement.
8. Mutual General Release. The Company on one hand, and Mowbray on the
other hand, hereby each release, remise, acquit and forever discharge the other
party and its respective, agents, principals, servants, parents, subsidiaries,
partners, affiliates, officers, directors, shareholders, attorneys, employees,
heirs, executors, successors and assigns from all actions, causes of action and
from any and all past, present or future actions, causes of action, suits,
claims, demands, debts, sums of money, judgments, liabilities (statutory or
otherwise), damages, costs, expenses, interest, compensation, liens and
attorneys' fees in law or in equity (collectively "Claims") which relate to or
in any way are based upon or arise out of in any respect the service, acts,
facts, circumstances, matters, claims, transactions or occurrences of or
involving Mowbray as an officer, director and/or employee of the Company.
Notwithstanding the foregoing, nothing herein will release the Company from its
obligations under this Agreement or its indemnification and expense advancement
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obligations to Mowbray under its Bylaws and under Delaware law. The Company
further agrees that it will not prosecute nor allow to be prosecuted on its
behalf in any administrative agency, whether federal or state, or in any court,
whether federal or state, any claims or actions against Mowbray, his agents and
attorneys, heirs, representatives, successors and assigns, related to the
matters discharged herein.
The parties hereby expressly waive all rights under California
Civil Code section 1542 which reads as follows:
Section 1542. A general release does not extend to claims
which the creditor does not know or suspect to exist
in his favor at the time of executing the release,
which if known by him must have materially affected
his settlement with the debtor.
10. No Derogatory Statements; Press Releases. a) Mowbray agrees not to
make any disparaging or derogatory statements about the Company, any of its
officers or directors, or any of its subsidiaries or other corporate affiliates,
except as may be required by law or in connection with the enforcement of his
rights under this Agreement or any other agreement related hereto.
b) The Company agrees not to make, and to cause the members of
the Executive Committee of the Company and the Company's directors not to make,
any disparaging or derogatory statements about Mowbray, except as may be
required by law or in connection with the enforcement of its rights under this
Agreement or any other agreement related hereto. The Company further agrees to
give positive references to any potential employer of Mowbray.
c) The Company shall provide Mowbray with the opportunity to
review and to approve, which approval shall not be unreasonably withheld, the
descriptions of this Agreement contained in (i) any Company press release, and
(ii) any of the Company's documents concerning this Agreement to be filed with
the Securities and Exchange Commission or distributed to the Company's
shareholders. Mowbray shall not issue any press release and shall not make any
other public statement except as required by law, concerning the transactions
consummated pursuant to this Agreement. The time permitted for obtaining
approval hereunder shall be subject to the Company's requirement of complying
with applicable law on timely disclosures.
11. Miscellaneous.
a. Expenses. The Company shall bear all of its costs and
expenses incurred in connection with the transactions contemplated hereunder and
shall, upon execution of this Agreement, pay directly to counsel for Mowbray,
for legal and accounting fees and costs in connection with the negotiation and
execution of this Agreement, or reimburse Mowbray if previously paid by him, the
sum of Seven Thousand Five Hundred Dollars ($7,500).
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b. Indulgences, Etc. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
c. Governing Law. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of California.
d. Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
personally delivered, or on the next business day when deposited with a
reputable overnight courier service, such as Federal Express, for delivery to
the intended addressee. All notices shall be addressed as follows:
If to the Company: Family Bargain Corporation
0000 Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
With a copy to: Xxxxx Xxxxx, Esq.
Weil, Gotshal & Xxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Mowbray: Xxxxxxx X. Xxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
With a copy to: Xxxxxxxx X. Xxxxxxx, Esq.
Xxxxxxx & Xxxxxxx LLP
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Either party may change the address to which communications or copies are to be
sent by giving notice of such change of address in conformity with the
provisions of this subparagraph for the giving of notice, and such change of
address shall become effective upon actual receipt of such notice.
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e. Binding Nature of Agreement - No Assignment. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, personal representatives, successors and assigns,
except that no party may assign or transfer its rights nor delegate its duties
under this Agreement without the prior written consent of the other party
hereto.
f. Execution in Counterpart. This Agreement may be executed in
counterparts, each of which shall be deemed an original as against the party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
g. Provisions Separable. The provisions of this Agreement are
independent of and separable from each other; and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
h. Paragraph Headings. The Paragraph and subparagraph headings
in this Agreement are for convenience of reference only; they form no part of
this Agreement and shall not affect its interpretation.
12. Entire Agreement This Agreement contains the entire understanding
among the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as herein
and therein contained. The express terms hereof control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an agreement
in writing.
13. Court Jurisdiction. The parties agree that any action or proceeding
to enforce any provision of this Agreement, or otherwise arising out of or
relating to this Agreement, may be brought in any federal or state court in San
Diego County in the State of California, and in no other court, and each party
(a) consents to the jurisdiction of each of those courts in any such action or
proceeding (b) agrees not to seek to change the venue of any such action or
proceeding from any of those courts because of inconvenience of the forum or
otherwise (except that nothing in this Paragraph will prevent a party from
removing any action from a state court to a federal court sitting in the
appropriate venue, and (c) agrees that process in any such action or proceeding
may be served by registered mail or in any other manner permitted by the rules
of the court in which the action or proceeding is brought.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
Family Bargain Corporation, a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxxxxx
Its: Chairman
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx
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