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EXHIBIT 10.2
SEPARATION AGREEMENT AND RELEASE OF CLAIMS
This Separation Agreement and Release of Claims (the
"Agreement") is entered into by and between Xxxxxxx X. Xxxxxxxx ("Xxxxxxxx")
and MacFrugal's Bargains o Close-Outs, Inc. (the "Company") to resolve all
matters between Xxxxxxxx and the Company concerning Xxxxxxxx' employment with
the Company and termination of that employment.
RECITALS
WHEREAS, Xxxxxxxx served as President and Chief Executive
Officer of the Company for more than four years; and
WHEREAS, Xxxxxxxx and the Company were parties to an
Employment Agreement dated November 12, 1990, as amended (the "Employment
Agreement"), which Employment Agreement was terminated as of the Company's
Annual Meeting of Stockholders on June 14, 1995 by mutual agreement of the
parties; and
WHEREAS, the parties hereto desire to resolve all matters
relating to Xxxxxxxx' employment with the Company and set forth solely in this
document all continuing understandings and agreements between them.
NOW, THEREFORE, the parties hereby agree as follows:
AGREEMENT
1. Termination of Employment Agreement. Xxxxxxxx and
the Company agree and confirm that (a) the Employment Agreement was terminated
on June 14, 1995; (b) Xxxxxxxx ceased performing services for the Company as a
director and as an employee on June 14, 1995; and (c) neither party has any
remaining obligations or responsibilities thereunder except as otherwise set
forth in this Agreement.
2. Cash Payments. Xxxxxxxx will be paid weekly by the
Company at the rate of $45,000 per month, with the last such payment to be made
with respect to the last week of September, 1996. Xxxxxxxx will also be
entitled to receive from the Company an additional cash payment equivalent to
the amount of the "Performance Bonus" to which he would have been entitled
under the terms of the Employment Agreement with respect to the Company's
fiscal year ending on or about January 31, 1996. This cash bonus, if any, will
be paid to Xxxxxxxx at the same time comparable performance bonus payments are
made to executive officers of the Company.
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3. Benefits. The Company will, through September 30,
1996, provide to Xxxxxxxx either (a) the same medical, dental, and life
insurance benefits as those which were provided to him while he was an active
executive of the Company, or (b) substantially equivalent coverage. As of
August 1, 1995, payments made by the Company with respect to William's
medical and dental insurance coverages will be COBRA continuation of group
health benefits.
4. Stock Options. The terms of all stock options held
by Xxxxxxxx which were vested and exercisable as of March 15, 1995 pursuant to
the Company's Incentive Stock Plan are modified and extended to permit exercise
by Xxxxxxxx of such currently exercisable stock options through and until
December 15, 1996. An itemization of Xxxxxxxx' stock options is attached
herewith as Schedule X. Xxxxxxxx acknowledges his understanding that this
modification and extension will result in such options being treated for tax
purposes as "nonqualified" stock options rather than "incentive" stock options.
All other stock options held by Xxxxxxxx which were not vested and exercisable
as of March 15, 1995 are terminated and of no further force and effect.
5. Return of Company Property. Xxxxxxxx confirms that
all items of property of the Company possessed by him which were utilized in
connection with his employment have been returned to the Company, except for an
automobile and cellular telephone issued to him by the Company. Xxxxxxxx
agrees to return the automobile and cellular telephone to the Company in good
condition and repair on or before September 30, 1995.
6. Noncompetition and Prohibited Solicitation. In
consideration for the payments and benefits provided by the Company to Xxxxxxxx
hereunder, Xxxxxxxx agrees that for a period of two years from the date hereof,
he will not compete against the Company, directly or indirectly, alone or as a
member of a partnership or group, or as an officer, director, stockholder,
employee, consultant, representative or affiliate of any company involved in a
close-out merchandise business in any county of any state in the United States
in which the Company is now conducting business. Xxxxxxxx also agrees that for
the same two year period, he will not, without the written consent of the
Company, solicit, entice or persuade any employee of the Company or any
affiliate of the Company to leave the services of the Company or such affiliate
for any reason.
7. Protected Information. Xxxxxxxx recognizes and
acknowledges that during the course of his employment, (a) the Company
disclosed and furnished to him confidential and proprietary information
related to the Company's business, including without limitation, supplier and
vendor lists, ideas, processes, inventions and devices; (b) such confidential
information constitutes trade secrets of the Company; and (c) such information
was to be used by Xxxxxxxx for the purpose of carrying out his duties under the
Employment Agreement and was not to be disclosed for any other purpose. In
furtherance of the foregoing, Xxxxxxxx agrees not to misappropriate, disclose
or make available to anyone outside of the Company at any time any such
confidential information without the prior written consent of the Company,
which consent may be withheld for any reason or no reason at all. Xxxxxxxx
confirms he has returned to the Company copies of all confidential information
in his possession relating to the Company's business or prospects.
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8. No Disparagement and Business References. Xxxxxxxx
agrees to refrain from making disparaging remarks about the Company or its
officers or employees to any person or business entity, and the Company agrees
to use its best efforts to ensure that its officers and employees refrain from
making disparaging remarks to any person or business entity about Xxxxxxxx.
The Company agrees to provide Xxxxxxxx with a positive, truthful letter of
recommendation signed by Xxxxx X. Xxxxxxxx, its Chairman of the Board, on
Company letterhead, and the Company will use its best efforts to channel any
employment inquiry concerning Xxxxxxxx to Xx. Xxxxxxxx.
9. Confidentiality of this Agreement. This Agreement and
the terms hereof will remain strictly confidential and shall not be disclosed
to any person or entity, except (a) for Xxxxxxxx' spouse, financial, legal or
tax advisor, (b) response to inquiry by federal or state tax authorities, (c)
as required to enforce this Agreement or (d) as required by law. The Company
and Xxxxxxxx specifically agree that this Agreement is not citable for any
purpose in any other legal or administrative proceeding (except a proceeding to
enforce this Agreement).
10. Mutual General Release. As a material provision of
this Agreement, Xxxxxxxx, on behalf of himself, his heirs and assigns, does
hereby release the Company, its shareholders, subsidiaries, and affiliated
companies and each of their respective officers, directors and employees from
any and all claims, liabilities, demands, rights and interests of whatsoever
kind and character, including, but not limited to, those arising from or
attributable to Xxxxxxxx' employment with the Company or arising from, or in
any way attributable to, the Employment Agreement including claims for breach
of contract, breach of implied covenant, breach of oral or written promise,
wrongful termination, race, age, sex, national origin or other discrimination,
including any claims under the federal Age Discrimination in Employment Act of
1967, and any claims for additional payment or reimbursement in the event that
any taxing authority should determine that monies or benefits allocated or paid
to compromise his claims constitute taxable income in whole or in part. The
Company, on behalf of itself, its shareholders, subsidiaries, and affiliated
companies and each of their respective officers, directors and employees, does
hereby release Xxxxxxxx and his heirs and assigns from any and all claims,
liabilities, demands, rights and interests of whatsoever kind and character,
including but limited to, those arising from or attributable to Xxxxxxxx'
employment with the Company or arising from, or in any way attributable to, the
Employment Agreement including claims for breach of contract, breach of implied
covenant and breach of any oral or written promise. The Company further agrees
to defend and indemnify Xxxxxxxx and hold him harmless with respect to any
claims, liabilities or demands made against Xxxxxxxx by any persons based upon
actions taken, or alleged to have been taken, by Xxxxxxxx during the course and
scope of his employment service as President and Chief Executive Officer of the
Company. Xxxxxxxx and the Company specifically and expressly waive and release
all rights under the provisions of Section 1542 of the California Civil Code,
which provides as follows:
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.
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11. Arbitration. All claims or controversies of any type
between Xxxxxxxx and the Company regarding matters pertaining to this Agreement
or Xxxxxxxx' employment relationship with the Company (except the Company's
right to seek injunctive relief as contemplated by the last sentence of this
paragraph 11) will be settled and finally determined by one arbitrator in Los
Angeles County, California in accordance with the Employment Dispute Resolution
Rules of the American Arbitration Association, and judgment by the arbitrator
may be entered in any court having jurisdiction thereof. This agreement to
arbitrate includes any claims for breach of contract, wrongful termination,
discrimination of any type and all other claims of any type to the maximum
extent permissible. In the event of breach or threatened breach of paragraph 6
or 7 above, the Company may, either with or without pursuing any potential
damage remedies, immediately seek to obtain and enforce an injunction
prohibiting Xxxxxxxx from violating the provisions of said paragraphs 6 and 7.
12. No Admissions. Nothing contained herein shall be
construed as an admission of wrongdoing or liability by any party hereto.
13. California Law. This Agreement is to be interpreted
pursuant to California substantive law.
14. Invalid Provisions. Should any of this Agreement for
any reason be declared invalid, the validity and binding effect of any
remaining portion will not be affected, and the remaining portion of this
Agreement will remain in full force and effect as if this Agreement had been
executed with the invalid provision eliminated.
15. Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the legal relationship of
Xxxxxxxx and the Company and supersedes all prior and contemporaneous
agreements, representations and understandings of the parties. No
modification, amendment or waiver of any of the provisions of this Agreement
will be effective unless in writing and signed by both parties.
16. Counterparts. This Agreement is being executed in
more than one counterpart, each of which is legally binding and enforceable.
17. Waiting Period And Right Of Revocation. XXXXXXXX
ACKNOWLEDGES THAT HE IS HEREBY ADVISED THAT HE HAS THE RIGHT TO CONSIDER THE
AGREEMENT FOR TWENTY-ONE DAYS BEFORE SIGNING IT AND THAT IF HE SIGNS THIS
AGREEMENT PRIOR TO THE EXPIRATION OF TWENTY-ONE DAYS, HE IS WAIVING THIS RIGHT
FREELY AND VOLUNTARILY AND UPON ADVICE OF HIS COUNSEL. HE ALSO ACKNOWLEDGES
THAT HE IS HEREBY ADVISED OF HIS RIGHTS TO REVOKE THIS AGREEMENT FOR A PERIOD
OF SEVEN DAYS FOLLOWING THE SIGNING OF THIS AGREEMENT AND THAT IT SHALL NOT
BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED. TO
REVOKE THIS AGREEMENT, HE MUST NOTIFY THE COMPANY WITHIN SEVEN DAYS OF SIGNING
IT.
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18. Attorney Advice. Xxxxxxxx acknowledges that he is
aware of his right to consult an attorney, that he has been hereby advised to
consult with an attorney, and that he has consulted with an attorney prior to
signing this agreement.
19. Understanding of Agreement and Acknowledgments.
Xxxxxxxx acknowledges that he has carefully read this Agreement, that he fully
understands its final and binding effect, that the only promises made to him to
sign this Agreement are those stated above, and that he is signing this
Agreement voluntarily. Xxxxxxxx acknowledges and agrees that no monies or
benefits are owing to him, other than those specifically provided for or
referenced herein. The Company acknowledges and agrees that from and after
June 14, 1995, Xxxxxxxx will have no further obligation whatsoever to provide
services to the Company as an officer, director or employee.
DATED: September 6, 1995
/s/ XXXXXXX X. XXXXXXXX
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Xxxxxxx X. Xxxxxxxx
MACFRUGAL'S BARGAINS o CLOSE-OUTS, INC.
By: /s/ XXXXX X. XXXXXXXX
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____________________________ Xxxxx X. Xxxxxxxx, Chairman of the Board
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