[The XxxXxxx-Xxxxxxxxxx Corporation Letterhead]
TERMINATION AND GENERAL RELEASE AGREEMENT
In consideration of the covenants undertaken and releases contained
in this Termination and General Release Agreement (the "Agreement"), and for
other good and valuable consideration, receipt of which is hereby
acknowledged, The XxxXxxx-Xxxxxxxxxx Corporation ("the Company") and Xxxxxx
X. Xxxxxxx ("Xxxxxxx") agree as follows:
1. Xxxxxxx'x employment with the Company and his status as an
officer, employee or director (if applicable) with any subsidiaries of the
Company is to be terminated effective January 31, 1999. All employment
obligations, accruals, benefits, payments, and other obligations (except as
expressly provided in paragraph 2 below) shall cease as of that date;
provided, that nothing herein shall affect Xxxxxxx'x relationship with the
Company as a member of the Company's Board of Directors pursuant to
arrangements which are to be deemed outside the scope of this Agreement.
Xxxxxxx acknowledges receipt of full payment of salary and all other
applicable benefits through January 31, 1999, as required by previous
obligations and by law. Xxxxxxx shall have the option to convert and continue
health insurance coverage as provided under federal law (COBRA).
2. (a) Any and all stock options held by Xxxxxxx will be treated as
provided on Schedule A hereto; and to the extent the terms of these options
as provided on Schedule A are modified to be different from the terms
contained in the Stock Option Agreements that they were issued under, the
terms contained in Schedule A shall control and the Stock Option Agreements
are hereby modified to conform to Schedule A (including, but not limited to,
with respect to vesting, exercisability, cancellation and option termination
date). However, Xxxxxxx and the Company agree that Xxxxxxx will not be
granted any "Reload Options" as such term is defined in the Stock Option
Agreements.
(b) Xxxxxxx shall receive a one-time payment of $100,000 on
January 31, 1999 with appropriate withholdings and authorized
deductions as in effect at the time of termination.
(c) Xxxxxxx and the Company agree that the Change in Control
Agreement between Xxxxxxx and the Company dated as of November 16,
1998, a copy of which is attached as Schedule B, is hereby terminated.
(d) If Xxxxxxx elects to exercise his rights under COBRA to
continue the medical benefits provided under the Company medical plan
in which he was participating, the Company shall continue to pay the
same amount towards the premium as it paid towards the premium
immediately prior to the termination to continue Xxxxxxx'x medical
coverage for a period not to exceed 12 months after the termination
date. Other than the Company's payment to Xxxxxxx of the premium,
Xxxxxxx shall be subject to all of the terms and conditions of the
Company's medical plan that are applicable to the Company's other
employees. The Company's obligation under this subparagraph (e) shall
terminate immediately upon Xxxxxxx'x commencing employment with another
employer and becoming eligible to participate in the medical plan
offered by the new employer or if Xxxxxxx becomes otherwise ineligible
for continuance of medical insurance coverage under COBRA. Xxxxxxx
agrees to notify the Company in writing immediately of the fact that he
has accepted new employment and to provide the Company with a copy of
his new employer's medical insurance.
(e) The Company will continue Xxxxxxx'x participation in its
current Company Automobile Benefits Program until April 30, 1999.
Xxxxxxx'x continued participation in that program through April 30,
1999 will be subject to all the terms and conditions of that program
which are in effect and applicable to other Company executives
participating in that program.
(f) Xxxxxxx'x entitlement to the compensation and benefits
described in this Agreement is expressly conditioned upon his execution
of the Company's current Separation Non-Disclosure Agreement.
3. Except for those obligations expressly set forth in this
Agreement, indemnification under existing charter documents or contracts for
third party claims relating to Xxxxxxx'x activities and capacities relating
to the Company prior to the date hereof, and future obligations arising under
the agreements relating to the stock options referenced on Schedule A,
Xxxxxxx hereby acknowledges full and complete satisfaction of and releases
and discharges and covenants not to sue the Company, its subsidiaries, parent
and affiliated corporations, past and present, and each of them, as well as
its and their directors, officers, shareholders, representatives, assignees,
successors, agents and Xxxxxxx'x, past and present, and each of them
(individually and collectively, "Releasees") from and with respect to any and
all claims, wages, agreements, obligations, demands and causes of action,
known or unknown, suspected or unsuspected, of any nature whatsoever arising
out of or in any way related to any transactions, occurrences, statements,
acts or omissions occurring on or prior to the date of this Agreement
(individually and collectively the "Claims") whether based on contract, tort,
statute or any other source. Such Claims include but are not limited to those
arising out of or in any way connected with Xxxxxxx'x employment relationship
with the Company, or termination thereof, such as and without limiting the
generality of the foregoing, any Claim for employment, wages, severance pay,
vacation pay, stock option, bonus or similar benefit, sick leave, pension,
retirement, vacation pay, life insurance, health, medical or disability
insurance or
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any other fringe benefit, workers' compensation or disability, and any claim
under Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, the Family and Medical
Leave Act, the California Fair Employment and Housing Act, the California
Family Rights Act, or any other federal, state or local law, regulation or
ordinance. If by operation of law there are any Claims which are not deemed
fully discharged and satisfied by the releases herein, then the value of the
above consideration shall be credited and applied against any liability or
debt to Xxxxxxx which the Company may have pursuant to any such unreleased
Claim(s); provided, that such credit shall not exceed 90% of the amount of
the full value of the above consideration.
4. The parties intend the releases of this Agreement to be as
comprehensive as permitted by law, and to be effective as a bar to every
Claim, demand and cause of action stated above, whether known or unknown,
suspected or unsuspected, even if Xxxxxxx later discovers additional or
different claims or facts which if known at the time of executing this
Agreement may have affected this settlement. Xxxxxxx hereby expressly waives
any rights and benefits conferred by Section 1542 of the California Civil
Code, with provides that, "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."
5. Xxxxxxx expressly acknowledges and agrees that, by entering into
this Agreement, Xxxxxxx is waiving any and all rights or claims that he may
have arising under the Age Discrimination in Employment Act of 1967, as
amended, which have arisen on or before the date of execution of this
Agreement. In furtherance of this intention, Xxxxxxx expressly acknowledges
and agrees that:
(a) In return for this Agreement, Xxxxxxx will receive
compensation and consideration beyond that to which Xxxxxxx was already
entitled to receive before entering into this Agreement;
(b) Xxxxxxx has been advised by the Company, and is xxxxxx
advised in writing by this Agreement, to consult with an attorney
before signing this Agreement;
(x) Xxxxxxx was given a copy of this Agreement on February 17,
1999, and informed that Xxxxxxx has up to twenty one (21) calendar days
within which to consider it, although Xxxxxxx may sign and return it
sooner if Xxxxxxx wishes to do so; and
(x) Xxxxxxx has been informed, and is hereby informed, that
Xxxxxxx has seven (7) days following his signature of the Agreement, in
which to revoke this Agreement and return the payment made pursuant to
Section 2(b) hereof.
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Such revocation must be in writing and hand-delivered to the Company
during or at the end of the seven-day period. If there is no such
revocation, this Agreement shall become binding and effective upon
expiration of the seven-day period.
6. If any provision of this Agreement or its application is held
invalid, the invalidity shall not affect other provisions or applications of
the Agreement which can be given effect without the invalid provisions or
application and, therefore, the provisions of this Agreement are declared to
be severable. This Agreement may be modified only by a writing signed by the
parties. Xxxxxxx agrees to keep the terms of this Agreement confidential.
7. Any dispute or controversy between Xxxxxxx, on the one hand, and
the Company (or any other Releasee), on the other hand, in any way arising
out of, related to, or connected in any way with this Agreement or any
subject matter related thereto, and otherwise cognizable in a court, shall
instead be resolved through final and binding arbitration in Los Angeles,
California, pursuant to California Civil Procedure Code xx.xx. 1282-1284.2,
with the exception of Sections 1283 and 1283.05.
The undersigned acknowledge that they have carefully read this
Agreement, and that they fully understand its terms. They understand that it
includes a full and final release and settlement of all Claims of any kind
which Xxxxxxx may have against the Company or other Releasees, as of the date
of signing, whether or not such claims are currently known or suspected, and
they voluntarily sign it with such understanding.
EXECUTED this 4th day of March 1999, at Los Angeles, California.
/s/ Xxxxxx X. Xxxxxxx
______________________________
Xxxxxx X. Xxxxxxx
The XxxXxxx-Xxxxxxxxxx Corporation
/s/ Xxxxx Xxxxx
By: ________________________________
Xxxxx Xxxxx
Its: Chairman of the Board and Chief Executive Officer
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SCHEDULE A FOR XXXXXX X. XXXXXXX
Unvested Unvested Exercisable Exercisable
Originally Prior to After Prior to After Termination
No. Option Date Granted Price Vested 1/31/99 1/31/1999* 1/31/99 1/31/99 Date of Option
1503 1/3/95 2,000 $10.500 2,000 - - 2,000 2,000 1/3/00
1512 3/15/95 10,000 $12.500 10,000 - - 10,000 10,000 3/15/00
1587 1/2/96 3,000 $15.875 3,000 - - 3,000 3,000 1/2/01
1594 1/2/97 3,000 $7.750 3,000 - - 3,000 3,000 1/2/02
1908 1/2/98 3,000 $9.750 3,000 - - 3,000 3,000 1/2/03
2298 7/15/98 125,000 $9.000 - 125,000 62,500 - 62,500 1/31/04
Total 146,000 21,000 125,000 62,500 21,000 83,500
*These options will be cancelled as of January 31, 1999.
SCHEDULE B
CHANGE IN CONTROL AGREEMENT
[The XxxXxxx-Xxxxxxxxxx Corporation Letterhead]
November 16, 1998
Xx. Xxxxxx X. Xxxxxxx
c/o The XxxXxxx-Xxxxxxxxxx Corporation
000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Re: CHANGE IN CONTROL AGREEMENT
Dear Xx. Xxxxxxx:
The XxxXxxx-Xxxxxxxxxx Corporation (the "Company") considers the
establishment and maintenance of sound and vital management to be essential
to protecting and enhancing the best interests of the Company and its
stockholders. The Company also considers it essential to the best interests
of the Company and its stockholders that its key management personnel be
encouraged to remain with the Company and continue to devote full attention
to the Company's business in the event an effort is made to obtain control of
the Company through a tender offer or otherwise. In this connection, the
Company recognizes that the possibility of a change in control and the
uncertainty and questions which it may raise may result in the departure or
distraction of key management personnel to the detriment of the Company and
its stockholders. Although no such change in control is currently
anticipated, the board of directors of the Company has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of key members of the Company's management to their
assigned duties without distraction in the face of the potentially disturbing
circumstances arising from the possibility of a change in control of the
Company.
The Board recognizes that your contributions to the past and future
growth and success of the Company have been substantial. Should the Company
receive any proposal from a third person concerning a possible business
combination with, or acquisition of equity securities of, the Company, the board
believes it imperative that the Company and the board be able to rely upon you
to continue in your position, and that the Company be able to receive and rely
upon your advice, if so requested, as to the best interests of the Company and
its stockholders without concern that you might be distracted by the personal
uncertainties and risks created by such a proposal. Should the Company receive
any such proposals, in addition to your regular duties, you may be called upon
to assist in the assessment of such proposals, advise management as to whether
such proposals would be in the best interests of the Company and its
stockholders, and to take such actions as the Board might determine to be
appropriate.
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Accordingly, to assure the Company that it will have your continued
undivided attention and services and the availability of your advice and counsel
notwithstanding the possibility, threat or occurrence of a bid to take over
control of the Company, and to induce you to remain in the employ of the
Company, and for other good and valuable consideration, this letter agreement
(the "Agreement") sets forth benefits which the Company agrees will be provided
to you in the event of a Change in Control (as defined below) of the Company
prior to the expiration of this Agreement and while you are still an employee of
the Company.
1. CHANGE IN CONTROL. A "Change in Control" of the Company means and shall
be deemed to have occurred if and when: (i) within the meaning of Section 13(d)
of the Securities Exchange Act of 1934, any person or group becomes a beneficial
owner, directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding securities;
(ii) individuals who were members of the board of directors of the Company
immediately prior to a meeting of the stockholders of the Company involving a
contest for the election of directors shall not constitute a majority of the
board of directors following such election; (iii) the stockholders of the
Company approve the dissolution or liquidation of the Company; (iv) the
stockholders of the Company approve an agreement to merge or consolidate, or
otherwise reorganize, with or into one or more entities which are not
subsidiaries, as a result of which less than 50% of the outstanding voting
securities of the surviving or resulting entity are, or are to be, owned by
former stockholders of the Company (excluding from the term "former
stockholders" a stockholder who is, or as a result of the transaction in
question becomes, an "affiliate," as that term is used in the Securities
Exchange Act of 1934 and the rules promulgated thereunder, of any party to such
merger, consolidation or reorganization); or (v) the stockholders of the Company
approve the sale of substantially all of the Company's business and/or assets to
a person or entity which is not a subsidiary; PROVIDED, HOWEVER, that no Change
in Control of the Company shall be deemed to have occurred if the transaction
giving rise thereto was approved by a majority of the board of directors who
were in office immediately prior to such transaction.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE IN CONTROL. If, within two
years following a Change in Control of the Company, Company terminates
Employee's employment for any reason, or if Employee terminates his employment
with the Company for any reason other than death or disability, the Company
shall pay Employee a lump sum amount equal to 2.5 times Employee's "base amount"
as defined below. Such amount shall be payable within 10 days after such
termination of employment.
3. ESTABLISHMENT OF TRUST; FUNDING OF TRUST UPON CHANGE IN CONTROL.
(a) The Company shall establish, as soon as practicable, a
trust for the purpose of holding assets to make any payments that may be
required under the terms of this Agreement. Such trust, which may be a
sub-trust of a larger trust, shall be revocable prior to a Change in Control
but shall become irrevocable upon a Change in Control. Such trust shall be a
grantor trust under which the income is taxable to the Company and no
contributions or income are taxable to the Employee until funds are
distributed to him.
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(b) The trust described herein shall be initially funded
with a contribution of $1.00. Within 10 days following a Change in Control
of the Company, the Company shall transfer to the trust sufficient funds to
cover the maximum payment which could become payable to Employee under this
Agreement in the event Employee's employment with Company is terminated
within two years following the Change in Control.
4. PARACHUTE PAYMENTS.
(a) Notwithstanding anything in this Agreement to the contrary,
any "parachute payments" to be made to or for the benefit of Employee, whether
pursuant to this Agreement or otherwise, shall be modified to the extent
necessary so that the requirements of either subparagraph (i) or (ii) below are
satisfied (whichever results in the greater aggregate payments):
(i) the aggregate of "present value" of all "parachute
payments" payable to or for the benefit of Employee, whether pursuant
to this Agreement or otherwise, shall be less than three times
Employee's "base amount"; or
(ii) each "parachute payment" payable to or for the benefit of
Employee, whether pursuant to this Agreement or otherwise, shall be in an
amount which does not exceed the "reasonable compensation" allocable to
such "parachute payment."
(b) Notwithstanding anything in any other section of this
Agreement to the contrary, no "illegal parachute payments" shall be made to or
for the benefit of Employee.
(c) For purposes of this section:
(i) The term "base amount" shall have the meaning ascribed to
it under Section 280G(b)(3) of the Internal Revenue Code of 1986, as
amended (the "Code");
(ii) the term "illegal parachute payment" shall mean a payment
described in Section 280G(b)(2)(B) of the Code;
(iii) the term "parachute payment" shall have the meaning
ascribed in Section 280G(b)(2)(A) of the Code, without regard to Section
280G(b)(2)(A)(ii) of the Code but with regard to Section 280G(b)(4)(A);
(iv) "present value" shall be determined in accordance with
Section 280G(d)(4) of the Code;
(v) the term "reasonable compensation" shall have the meaning
ascribed to it under Section 280G(b)(4)(B) of the Code (for personal
services actually rendered before the date of the Change in Control of
the Company); and
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(vi) the portion of the "base amount" and the amount of
"reasonable compensation" allocable to any "parachute payment" shall be
determined in accordance with Section 280G(b)(3) of the Code and Section
280G(b)(4)(B) of the Code, respectively.
(d) In the event the amount of any "parachute payments" which
would be payable to or for the benefit of Employee without regard to this
section must be modified to comply with this section, Employee shall direct
which "parachute payments" are to be waived or modified; provided, however, that
no change in timing of the payments shall be made without the consent of the
Company.
(e) Payment of amounts pursuant to this Agreement shall not,
unless directed by Employee, be delayed pending determination of the status
of a payment as a "parachute payment" or "illegal parachute payment" by the
Internal Revenue Service, court or similar body of competent jurisdiction.
(f) This section shall be interpreted so as to avoid the
imposition of excise taxes on Employee under Section 4999 of the Code or the
disallowance of a deduction to the Company pursuant to Section 280G(a) of the
Code.
5. TERM OF AGREEMENT. This Agreement shall be effective until December
31, 1999. Either party may, in its sole discretion and for any reason,
provide written notice of termination (effective as of the then applicable
expiration date) to the other party no later than 60 days before the
expiration date of this Agreement. If written notice is not so provided,
this Agreement shall be automatically extended for an additional period of 12
months past the expiration date. This Agreement shall continue to be
automatically extended for an additional 12 months at the end of such
12-month period and each succeeding 12-month period unless notices are given
in the manner described in this section. The foregoing notwithstanding, in
the event of a Change of Control the term of this Agreement will
automatically be extended for an additional three years past the expiration
date then in effect.
6. SUCCESSORS. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company.
7. GOVERNING LAW. This Agreement is made and entered into in the State of
California, and the laws of California shall govern its validity and
interpretation and the performance by the parties hereto of their respective
duties and obligations hereunder.
8. AMENDMENT OF AGREEMENT. This Agreement may be amended or modified only
by an instrument in writing executed by all of the parties hereto.
9. ARBITRATION. Any dispute, controversy, or claim arising out of or
relating to this Agreement or breach thereof, shall be submitted to arbitration
in accordance with the Voluntary Labor Arbitration Rules of the American
Arbitration Association. Judgment upon the award rendered by the arbitration
may be entered in any court in the State of California, or in any other court of
competent jurisdiction. In reaching his or her decision, the arbitrator shall
have no
4
authority to ignore, change, modify, add to or delete from any provision of
this Agreement, but instead is limited to interpreting this Agreement. In
the case of any arbitration or subsequent judicial proceeding arising after a
Change in Control, the Employee shall be awarded his costs, including
attorneys' fees.
10. NOTICES. Any notice or communications required or permitted to be given
to the parties hereto shall be delivered personally or be sent by United States
registered or certified mail, postage prepaid and return receipt requested, and
addressed or delivered as follows, or at such other address as the party
addressed may have substituted by notice pursuant to this section:
(a) If to the Company:
The XxxXxxx-Xxxxxxxxxx Corporation
000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000-1777
Attention: President
(b) If to Employee:
Xx. Xxxxxx X. Xxxxxxx
0000 Xxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
11. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein and there shall be deemed substituted such other provision
as will most nearly accomplish the intent of the parties to the extent permitted
by the applicable law. In case this Agreement, or any one or more of the
provisions hereof, shall be held to be invalid, illegal or unenforceable within
any governmental jurisdiction or subdivision thereof, the Agreement or any such
provision thereof shall not as a consequence be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or subdivision thereof.
12. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same Agreement.
The parties have executed this Agreement as of the date first written above.
Employee The XxxXxxx-Xxxxxxxxxx Corporation
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxx
______________________________ By ______________________________
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxx,
President & CEO
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