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Exhibit 10.9
SEVERANCE AGREEMENT
THIS AGREEMENT between Dairy Mart Convenience Stores, Inc., a Delaware
corporation (hereinafter referred to as the "COMPANY"), and Xxxxxxx X. Xxxxxx
(hereinafter referred to as the "EXECUTIVE"), dated as of this 15th day of
March, 2001:
WHEREAS, the Executive is the Executive Vice President and Chief Financial
Officer of the Company and a director of the Company;
WHEREAS, the Company and DM Acquisition Corp. (the "BUYER") have entered into an
Agreement and Plan of Merger, dated the date hereof, pursuant to which the Buyer
will be merged with and into the Company (the "MERGER");
WHEREAS, it is contemplated that upon consummation of the Merger, the Executive
will cease to serve on the Company's board of directors;
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 Executive will have the right to terminate his employment for Good
Reason (as defined in the Employment Agreement) after the closing under the
Merger Agreement because the Executive will cease to serve on the Company's
board of directors following the closing under the Merger Agreement;
WHEREAS, the Company and the Executive desire to confirm the Executive's
severance benefits to which he is entitled under the Employment Agreement;
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 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. At the effective time of the Merger, the
Executive shall have Good Reason to terminate his employment
with the Company and has voluntarily determined to terminate
his employment. The date such termination occurs shall be the
"Effective Date" and the Executive shall be entitled to the
following benefits as provided in the Employment Agreement:
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(a) SEVERANCE PAY. No later than the fifth business day
following the Effective Date, the Company shall pay
to the Executive an aggregate amount equal to:
(i) his accrued and unpaid Base Salary
through the Effective Date, PLUS
(ii) $136,500 (representing his bonus
amount) MULTIPLIED BY a fraction, the numerator of
which is the number of days elapsed from February 4,
2001 through the Effective Date and the denominator
of which is 365, PLUS
(iii) $1,234,500.
(b) GROSS-UP PAYMENT. In addition to the amount set forth
in Section 1.1(a) hereof, the Company shall pay to
the Executive no later than the fifth business day
following the Effective Date the amount of the
Gross-Up Payments referred to in Section 12(b)(iii)
of the Employment Agreement, subject to the
provisions of Section 12(b)(v) of the Employment
Agreement.
(c) AUTOMOBILE. No later than the fifth business day
following the Effective Date, the Company shall
transfer unrestricted ownership and legal title, free
and clear of any liens or other encumbrances, to the
automobile made available by the Company for the
Executive's use and the Company shall pay or
reimburse all sales or other similar taxes due as a
result of such transfer.
(d) BENEFITS. Until the earlier of (i) the third
anniversary of the Effective Date; or (ii) the date
on which the Executive and his dependents shall have
become eligible for substantially equivalent coverage
provided by a subsequent employer, the Company shall
maintain in full force and effect for the benefit of
the Executive and his family continued coverage under
all health, medical, dental and hospitalization plans
(but not any other employee benefits plans, stock
programs, qualified plans or other forms of
retirement or deferred compensation) maintained by
the Company or its successor during such period on
the same terms and conditions, including, without
limitation, any premium payment obligations
applicable to executive officers of the Company. Such
period shall be inclusive of any applicable COBRA
period. The Executive, however shall not be entitled
to participate in any programs under or related to an
Internal Revenue Code of 1986, Section 125 program.
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(e) LIFE INSURANCE POLICIES. As of the Effective Date,
the Company shall assign to the Executive all right,
title and interest in and to the two life insurance
policies covering the Employee's life that are held
by the Company, each of which is in the face amount
of $250,000 (including the cash surrender value
relating thereto).
(f) OFFICE EQUIPMENT. As of the Effective Date, subject
to compliance with Section 13(b) of the Employment
Agreement, the Company shall assign to the Executive
all right, title and interest in and to the personal
computer of the Company currently used by the
Executive in his home.
(g) EXPENSE REIMBURSEMENT. The Company shall reimburse
the Executive for all business expenses incurred by
the Executive through the Effective Date in
connection with his employment by the Company
promptly upon submission by the Executive to the
Company of appropriate vouchers or expense
statements, pursuant to, and subject to the Company's
normal business practices in this regard.
(h) SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN ("SERP"). No
later than the fifth business day following the
Effective Date, the Company shall pay to the
Executive an amount equal to his benefits under the
Supplemental Executive Retirement Plan calculated on
the basis that his Target Retirement Benefit (as
defined in the SERP) will be multiplied by a fraction
(not greater than one) equal to the number of his
credited Years of Benefit Service (as defined in the
SERP) as of the Effective Date divided by the total
number credited Years of Benefit Service that he
would have on the first day of the month next
following his 65th birthday.
1.2. OPTIONS AND OTHER STOCK AWARDS. The Company and the Executive
acknowledge that (a) all options and other rights to purchase stock
(including stock grants) granted under the Company's various stock
plans to the Executive as of the Effective Date shall immediately vest
and become exercisable in full and the Executive shall be entitled to
the rights provided under Section 2.01(e) of the Merger Agreement with
respect to the options to acquire 277,500 shares of the Company's
common stock held by the Executive (including all such options which
have become vested pursuant to this clause (a)) and (b) the Executive
shall be entitled to the rights provided under Section 2.01(c) of the
Merger Agreement with respect to the 34,875 shares of the Company's
common stock owned by the Executive and the 78,750 shares of the
Company's common stock which were granted to the Executive on July 14,
1997. Without limiting the foregoing, if the Merger does not occur by
July 14, 2001, then in lieu of the Executive receiving such 78,750
shares of the Company's common stock which were granted to the
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Executive on July 14, 1997, he will receive on the Effective Date a
cash bonus equal to $354,375.
2. 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. MUTUAL RELEASE
3.1 EXECUTIVE RELEASE. The Executive understands and agrees that
as of the Effective Date he releases and discharges the
Company, its affiliates, and each of Company's affiliates,
shareholders, officers, directors, employees, and agents
(collectively, the "Company Released Parties"), of and from
any and all claims, demands, actions or liability whatsoever,
based on events or circumstances existing as of the Effective
Date, whether known or unknown, arising out of or in
connection with his employment by, or membership on the Board
of Directors of, the Company or the termination of such
employment, including, but not limited to, any and all claims
arising under any federal, state or local laws prohibiting
age, race, sex, disability and other forms of discrimination,
including, but not limited to, age discrimination claims under
the Age Discrimination in Employment Act, claims under Title
VII of the 1964 Civil Rights Act, the Americans with
Disabilities Act, the Employee Retirement Income Security Act,
or arising under any other federal, state or local statute
relating to employment.
The Executive understands that he may be replaced by a younger
individual and expressly agrees that among the claims being
released herein are any and all claims that might arise out of
any such action by the Company or the Company's Released
Parties. The Executive voluntarily waives any right to seek
reemployment by the Company.
The Executive also agrees that neither he nor anyone acting on
his behalf will file, claim, xxx or cause or permit to be
filed or claimed, any action for damages or other relief
against the Company or the Company Released Parties involving
any matter occurring prior to the date of this Agreement, or
involving the effects of actions or practices which arose
prior to the date of this Agreement solely arising out of
Executive's Employment. The Executive further agrees that he
will neither seek nor accept any further benefit or
consideration from any source whatsoever in respect to any
claims solely arising out of Executive's Employment which he
has asserted or could have asserted against the Company or the
Company Released Parties.
Further, Executive agrees that this Agreement meets the
requirements of the Age Discrimination in Employment Act of
1967 ("ADEA"), as
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amended by the Older Workers' Benefit Protection Act of 1990
("OWBPA"), including the provisions of 29 U.S.C. ss. 626(f)(1)
regarding specific requirements for the waiver of rights and
claims thereunder in any way arising prior to the execution of
this Agreement. Those requirements include that Executive
understands and acknowledges that by executing this Agreement:
a. Executive is knowingly and voluntarily waiving any
and all rights and claims he may have under the ADEA and
OWBPA;
b. Executive is receiving hereunder consideration in
addition to anything of value to which he is already entitled;
c. Executive has been advised to consult with an
attorney prior to executing this Agreement;
d. Executive has carefully read this Agreement, knows
and understand its contents and its significance, and intends
to be bound by its terms;
e. Executive has been given a period of 21 days from
the receipt of this Agreement to consider its contents and
ramifications and his decision to sign it (although it may be
executed and returned prior to that if desired).
f. Executive will be given seven days following
execution of this Agreement to revoke it by notifying the
Company in writing as provided in Section 7, since it will not
become effective or enforceable and no payments will be made
under this Agreement until that seven day revocation period
has expired.
The Executive agrees that the contents of these paragraphs not
only release the Company and the Company Released Parties from
any and all claims as stated herein which he could or may make
on his own behalf, but also those claims solely with respect
to Executive's employment which could or may be made by any
other person or entity (including Executive's spouse and
family members).
It is further understood and agreed that this entire Agreement
is not to be construed as an admission of liability by the
Company or the Company Released Parties. Further, the payment
of monies under this Agreement does not constitute an
admission by or on behalf of the Company or the Company
Released Parties that you are entitled to any payment pursuant
to any policy or practice.
Nothing in this Agreement shall be construed as a release,
waiver or other relinquishment by you of (i) any claims,
demands, actions or liabilities based upon Executive's rights
pursuant to this Agreement, (ii) any indemnity to which the
Executive may be entitled pursuant to the terms and conditions
of the Company's Certificate of Incorporation, By-laws or any
directors' and officers' liability insurance policy in effect
as of the
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Effective Date (including, without limitation, any right the
Executive may have to retain separate counsel and
reimbursement by the Company in connection therewith) and
(iii) any right to collect any vested benefits to which he may
be entitled under the Company's 401(k) retirement plan.
3.2 COMPANY RELEASE. The Company understands and agrees that as of
the Effective Date it releases and discharges the Executive of
and from any and all claims, demands, actions or liability
whatsoever, based on events or circumstances as of the
Effective Date, whether known or unknown, arising out of or in
connection with the Executive's employment by the Company, or
the termination of such employment, except for any claims,
demands, actions or liability based upon the Company's rights
pursuant to this Agreement. Notwithstanding the foregoing, the
obligations and provisions under Section 13 of the Employment
Agreement shall survive in accordance with their terms.
4. RESIGNATIONS.
4.1 The Executive shall resign from the offices of Executive Vice
President and Chief Financial Officer of the Company on the
first business day following the consummation of the Merger.
The Executive shall resign as a member of the Board of
Directors of the Company immediately prior to the consummation
of the Merger pursuant to the terms of the Merger Agreement.
4.2 Prior to the consummation of the Merger, the Executive shall,
at the instruction of Xxxxxx X. Xxxxx, Xx., withdraw as a
general partner of New DM Management Associates I or assign
his general partnership interests to either Xxxxxx X. Xxxxx,
Xx. or New DM Management Associates I, in each case, without
receiving any additional consideration therefor, PROVIDED THAT
to the extent such withdrawal or assignment results in any
taxable income to the Executive that is not (a) able to be
offset against prior loss carry-forwards generated by New DM
Management Associates I or (b) as a result of the Executive
having been allocated prior losses from New DM Management
Associates I, the Company shall pay to the Executive a cash
bonus in an amount sufficient to satisfy the Executive's tax
liability with respect to such income. Contemporaneously with
and as a condition of such withdrawal or assignment, the
Executive's options that are subject to a pledge under
Partnership Agreement of DM Associates Limited Partnership, by
and among New DM Management Associates I, HNB Investment Corp.
and the Company, as amended, shall be released from that
pledge.
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5. REPRESENTATIONS AND WARRANTIES.
5.1 The Company has all requisite power and full legal right to
enter into this Agreement and to perform its agreements and
obligations hereunder. This Agreement and the transactions
contemplated hereby have been duly approved and authorized by
all requisite corporate action on the part of the Company.
This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms.
5.2 The execution, delivery, and performance by the Company of
this Agreement in accordance with its terms, and the
consummation by the Company of the transactions contemplated
hereby, will not result in any conflict, violation, breach, or
default, under or in respect of (x) the charter documents or
by-laws of the Company, (y) any judgment, decree, order,
statute, rule, or regulation binding on or applicable to the
Company or (z) any agreement or instrument to which the
Company is a party (including, without limitation, the Merger
Agreement).
6. 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.
7. 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 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.
8. 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: Dairy Mart Convenience Stores, Inc.
One Dairy Mart Way
000 Xxxxxxxxx Xxxxxxx Xxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxxx, Xx.
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WITH COPIES TO: Milbank, Tweed, Xxxxxx & XxXxxx LLP
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx Xxxxxxx
Xxxxx & Xxxxxxxxx LLP
3200 National City Center
0000 X. 0xx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx
TO THE EXECUTIVE: Xxxxxxx X. Xxxxxx
0000 Xxxxxx Xxxx Xxxxx
Xxxxxx, Xxxx 00000
WITH A COPY TO: Xxxxxx X. Xxxx, Esq.
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
9. GENERAL PROVISIONS.
9.1. 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 his 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.
9.2. SUCCESSORS. This Agreement shall inure to and be binding upon
the Company and the Company's successors and assigns. 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(d), of this
Agreement, the Company shall pay to the Executive, in a lump
sum payment without discounting to present value, an amount
equal to the aggregate of all remaining payments due under
such paragraph 1.1(d).
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9.3. 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.
9.4. 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.
9.5. 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.
9.6. GOVERNING LAW. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of
the State of Ohio, without regard to conflict of law
principles.
10. 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, as of the Effective Date,
this Agreement shall supersede all prior agreements and understandings
concerning the Executive and the Executive's rights upon the
termination of his employment, including, without limitation, the
Employment Agreement (except with respect to Section 13 thereof). Until
the Effective Date, the Employment Agreement shall remain in full force
and effect except as modified hereby and, after the Effective Date, to
the extent there is any express conflict between the Employment
Agreement and this Agreement, the provisions of this Agreement shall
control.
11. EFFECTIVENESS OF AGREEMENT. This Agreement will only become effective
upon the consummation of the Merger and will terminate upon the
termination of the Merger Agreement, except for the provisions of
Section 7 hereof which shall be effective as of the date hereof and
which shall survive termination of the Merger Agreement.
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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.
Dairy Mart Convenience Stores, Inc. Executive
By its Authorized Representative
By: /s/ Xxxxxx X. Xxxxx, Xx. /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxx, Xx. Xxxxxxx X. Xxxxxx
Title: Chairman, President and C.E.O.
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EXHIBIT A
DEFINITIONS
The following terms as used in this Severance Agreement have the following
meanings:
(a) "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 $275,000.
(b) "COMPANY" means Dairy Mart Convenience Stores, Inc. or any successor.
(c) "EMPLOYMENT AGREEMENT" means the Employment Agreement effective as of
January 1, 2000 between the Company and the Executive.
(d) "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.
