SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made as of the 1st day of July,
1999, between Tandycrafts, Inc., a Delaware corporation (the "Company"), and
{Name} (the "Executive") (all of whom are collectively referred to as the
"parties).
WHEREAS, the Executive is currently serving as the Company's {Title};
WHEREAS, the Executive possesses an intimate knowledge of the business and
affairs of the Company, its policies, methods, personnel and plans for the
future and has acquired contacts of considerable value to the Company;
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company has
been substantial and wishes to offer an inducement to the Executive to remain in
the employ of the Company;
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties agree as
follows:
1. Term. The term of this Agreement (the "Term") shall continue until
the earlier of (i) the expiration of the second anniversary of this Agreement,
(ii) the Executive's death, or (iii) the Executive's earlier voluntary
retirement; provided, however, that, commencing on July 1, 2001 and on each
subsequent anniversary date of this Agreement or any extension, this Agreement
and the Term shall automatically be extended for an additional year unless, not
later than 90 calendar days prior to such date, the Company shall have given
written notice to the Executive that it does not wish to have the Term Extended.
2. Definitions.
(a) Cause. For "Cause" shall mean that, during the Term, the Executive
shall have:
(i) committed an intentional material act of fraud or embezzlement in
connection with his duties or in the course of his employment
with the Company;
(ii) committed an intentional wrongful material damage to property of
the Company;
(iii) committed an intentional wrongful disclosure of material
secret processes or material confidential information of the
Company;
(iv) committed a felony criminal offense; or
(v) committed an intentional material breach of this Agreement,
intentionally failed to substantially perform his duties or
intentionally and repeatedly refused or failed to follow the
lawful and reasonable directives of the Board, in each case after
30 days written notice and failure to cure.
(vi) For the purposes of this Agreement, no act, or failure to act, on
the part of the Executive shall be deemed "intentional" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that his action or omission was in
the best interest of the Company.
(b) Code. The "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) Severance Compensation. The "Severance Compensation" shall be a lump
sum amount equal to 100% of the sum of (A) the average of the annual salary of
the Executive for the last two years based upon the dollar amount of the annual
salary then in effect and for the fiscal year preceding the year in which the
Termination Date occurs, plus (B) the average of the annual bonus or incentive
compensation of the Executive for the last two completed years, based upon the
dollar amount of bonus or incentive compensation that the Executive received
from the Company for the two fiscal years preceding the year in which the
Termination Date occurs.
(d) Termination Date. The "Termination Date" shall be the date upon which
the Company terminates the employment of the Executive.
3. Rights of Executive Upon Termination.
(a) The Company shall provide the Executive, within thirty days following
the Termination Date, Severance Compensation in lieu of compensation to the
Executive for periods subsequent to the Termination Date, if, the Company
terminates the Executive's employment during the Term, other than for any of the
following reasons;
(1) the Executive dies;
(2) the Executive becomes permanently disabled and is unable to work
for a period of 180 consecutive days; or
(3) for Cause.
(b) Notwithstanding the above section or any other provision of this
Agreement, in no event shall the Company pay or be obligated to pay the
Executive an amount which would be an Excess Parachute Payment. For purposes
of this Agreement, the term "Excess Parachute Payment" shall mean any payment or
any portion thereof which would be an "excess parachute payment" within the
meaning of Section 280G of the Code, and would result in the imposition of an
excise tax under Section 4999 of the Code, in the opinion of tax counsel
selected by the Company's independent accountants and acceptable to the
Executive. If it is established pursuant to a final determination of a court or
an Internal Revenue Service administrative appeals proceeding that,
notwithstanding the good faith of the Executive and the Company in applying the
terms of this Agreement, a payment (or portion thereof) made is an Excess
Parachute Payment, then, except as hereafter provided, the Executive shall have
an obligation to repay the Company upon demand an amount equal to the minimum
amount (but without interest) necessary to insure that no payments made or to be
made by the Company pursuant to this Agreement is an Excess Parachute Payment;
provided, however, that if, in the opinion of tax counsel selected by the
Company's independent accountants and acceptable to the Executive, such
repayment will not ensure that no Excess Parachute Payment would be made
hereunder, then (l) no such repayment obligation will exist and (2) the Company
shall pay to the Executive an additional amount in cash equal to the amount
necessary to cause the amount of the aggregate after-tax cash compensation and
benefits otherwise receivable by the Executive to be equal to the aggregate
after-tax cash compensation and benefits he would have received as if Sections
280G and 4999 of the Code had not been enacted.
(c) Upon written notice given by the Executive to the Company prior to the
receipt of Severance Compensation, the Executive, at his sole option, may elect
to have all or any part of any such amount paid to him, without interest, on an
installment basis selected by him.
(d) Except as provided in Section 12, the payment of Severance
Compensation by the Company to the Executive shall not affect any other rights
and benefits of the Executive provided by the Company, whether currently or in
the future, prior to the Termination Date, which rights shall be governed by the
terms thereof. The Company shall provide to the Executive for twelve months
after the Termination Date health care benefits substantially similar to those
which the Executive was receiving or entitled to receive immediately prior to
the Termination Date. Such health care benefits as provided by the Company,
however, shall be reduced to the extent comparable benefits are actually
received by the Executive during the Term as a result of employment other than
with the Company.
(e) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment required to be made hereunder on a timely
basis, the Company shall pay interest on the amount thereof on demand at an
annualized rate of interest equal to 120% of the then applicable Federal rate
determined under Section 1274(d) of the Code, compounded semi-annually (but in
no event shall such interest exceed the highest lawful rate).
(f) (1) Notwithstanding any other provision of this Agreement, no
Severance Compensation is due and owing under this Agreement unless and until
such time that the Executive executes a signed, written release, in a form
reasonably acceptable to the Company, releasing any and all employment related
claims the Executive may have against the Company, with the exception of the
following: claims for unreimbursed expenses incurred and submitted in
accordance with customary Company policies, claims for indemnification in
accordance with the Company's articles and bylaws and claims which may not be
released under applicable law.
(2) The Executive agrees that in consideration of the Company's
obligations to pay Severance Compensation during the Term and during the period
ending one year after the Termination Date (the "Non-Compete Period"), he shall
not:
(x) compete with any business that is conducted by the Company
or any of its subsidiaries at any time during the Non-Compete Period. For
purposes of this Agreement, the term "compete" shall include engaging in any
activity on behalf of himself or as a more than 1% equity holder, an officer, a
director, an employee, a partner, a member, a manager, an agent, a consultant, a
sole proprietor, or any other individual or representative capacity within the
territory in which the Company or any of its subsidiaries is doing business
during the Non-Compete Period;
(y) on behalf of himself or any other person or entity solicit
for employment any employee of Company or its subsidiaries who was such at any
time during the Non-Compete Period or cause any such employee to terminate his
employment by the Company or its subsidiaries during such Period; or
(z) solicit or intentionally cause any supplier or customer of
the Company or its subsidiaries who was such at any time during the Non-Compete
Period to cease doing business with or decrease the amount of business done with
the Company or its subsidiaries.
In the event restrictions contained in this Section 3(f)(2) shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of extending for too great a period of time or over too great a geographic area
or by reason of being too extensive in any other respect, such restrictions
shall be interpreted to extend only over the maximum period of time for which
they may be enforceable, and over the maximum geographic area as to which they
may be enforceable and to the maximum extent in all other respects as to which
they may be enforceable, all as determined by such court in such action.
4. No Mitigation Required. In the event that this Agreement or the
employment of the Executive hereunder is terminated, the Executive shall not be
obligated to mitigate his damages nor the amount of any payment provided for in
this Agreement by seeking other employment or otherwise, and except for the
termination of benefits pursuant to Section 3(d), the acceptance of employment
elsewhere after termination shall in no way reduce the amount of Severance
Compensation payable hereunder.
5. Successors: Binding Agreement.
(a) The Company will require any successor and any corporation or other
legal person which is in control of such successor (as "control" is defined in
Regulation 230.405 or any successor rule or regulation promulgated under the
Securities Act of 1933, as amended) to all or substantially all of the business
and/or assets of the Company (by purchase, merger, consolidation or otherwise),
by agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Notwithstanding the foregoing, any such assumption shall not,
in any way, affect or limit the liability of the Company under the terms of this
Agreement or release the Company from any obligation hereunder. As used in this
Agreement, "Company" shall mean the Company and any successor to its business
and/or all or substantially all of its assets which executes and delivers the
agreement provided for in this Section 5 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
6. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or received after being mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: {Name}
{Address}
If to the Company: Chief Executive Officer
Tandycrafts, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxx 00000
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of chance of address shall be
effective only upon receipt.
7. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
agreements or representations, oral or otherwise, express or implied, unless
specifically referred to herein with respect to the subject matter of this
Agreement have been made be either party which are not set forth expressly in
this agreement. THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF
THIS AGREEMENT SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
8. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. Employment Rights. Nothing implied in this Agreement shall create any
right or duty on the part of the Company or the Executive to have the Executive
remain in the employment of the Company. The Executive's employment with the
Company remains terminable at will. Notwithstanding any other provision hereof
to the contrary, the Executive may, at any time during the Term, upon the giving
of 30 days prior written notice, terminate his employment hereunder.
11. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling; provided,
however, that no withholding pursuant to Section 4999 of the Code shall be made
unless, in the opinion of tax counsel selected by the Company's independent
accountants and acceptable to the Executive, such withholding relates to
payments which result in the imposition of an excise tax pursuant to Section
4999 of the Code.
12. Special Termination Agreement. Any amounts payable to Executive
hereunder shall reduce or be reduced dollar for dollar by any amounts paid or
payable to Executive under the Special Termination Agreement made as of July 1,
1999 between Executive and the Company.
13. Rights and Remedies Cumulative. Subject to the provisions of Section
3(f) and Section 12, no right or remedy conferred upon or reserved to the
Executive is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy under this Agreement, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.
TANDYCRAFTS, INC.:
By: _______________________________________
Its: Chief Executive Officer
EXECUTIVE:
By: _______________________________________
{Name}
