RESIGNATION AND RELEASE AGREEMENT
This RESIGNATION AND RELEASE AGREEMENT (the "Agreement") among Xxxxxx X.
Xxxxx ("Xxxxx"), Egghead, Inc. and DJ&J Software Corporation d/b/a Egghead
(D J & J Software Corporation, collectively with Egghead, Inc., "Egghead") is
dated as of February 15, 1997. Xxxxx and Egghead wish to amicably terminate
Xxxxx'x employment with Egghead, and the parties wish to clearly set forth
the terms and conditions of Xxxxx'x departure from his employment.
Therefore, in consideration of the mutual promises and undertakings in this
Agreement, Xxxxx and Egghead agree as follows:
1. RESIGNATION. Effective February 15, 1997 ("Date of Resignation"), Xxxxx'x
employment with Egghead is terminated and Xxxxx resigns from his employment as
Senior Vice President of Egghead and from any other designated Egghead
responsibilities.
2. PAY PROTECTION.
(a) GUARANTEED PAYMENT. Commencing the Date of Resignation, Egghead
shall pay Xxxxx his current annual base salary of $170,000 for a period of
nine (9) months (the "Severance Period"), less any lawful withholding. Such
amount shall be paid in bi-weekly installments at normal bi-weekly payroll
intervals or pursuant to a payment schedule that is mutually agreeable to the
parties. Xxxxx shall also be paid any unused vacation pay accrued as of the
Date of Resignation, as reflected in Egghead's records, to be paid at the end
of the payroll period next following the Date of Resignation, or pursuant to
a payment schedule that is mutually agreeable to the parties. Xxxxx shall
not be entitled to vacation pay accrual during the Severance Period. Xxxxx
agrees to be available for consulting, either in person or via telephonic
means, no more than one day per month, at the reasonable request of Egghead
management.
(b) CONDITIONAL PAYMENT. Upon termination of the Severance Period, and
provided Xxxxx has failed to commence alternative employment, Egghead shall
continue to pay Xxxxx his current annual base salary, less any lawful
withholding, in bi-weekly installments for a period that will terminate on the
earlier of: (i) nine (9) months from the ending date of the Severance Period; or
(ii) the date Xxxxx commences alternative employment (the "Extension Period").
Such extension payments shall be paid at normal bi-weekly payroll intervals.
Xxxxx shall not be entitled to vacation pay accrual during the Extension Period.
From time to time during the Extension Period, but in no event more frequently
than monthly, Xxxxx will be available to orally (by telephone) update either the
President or Chief Financial Officer of
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Egghead, Inc. on the status of his efforts to obtain alternative employment, and
he will notify Egghead in writing within ten (10) days after accepting
alternative employment. Upon accepting new employment, Xxxxx will not
unreasonably delay commencing work for his new employer in order to continue
receiving payments during the Extension Period. For purposes of this Agreement,
"alternative employment" is defined as any business relationship from which
Xxxxx receives W-2/1099 wages equal to fifty percent (50%) or more of his
average monthly Egghead severance payment as herein described in Section 2(a).
(c) DEATH OR DISABILITY. In the event of Xxxxx'x death prior to
completion of the Severance Period, Egghead shall be obligated to continue until
the end of the Severance Period the severance payments set forth under Section
2(a) hereof and the COBRA subsidies (defined below) set forth under Section
3(b), if applicable. In the event of Xxxxx'x death subsequent to the end of the
Severance Period but prior to completion of the Extension Period, and provided
he has not procured alternative employment as herein defined, Egghead shall be
obligated to continue until the end of the Extension Period Xxxxx'x extension
payments set forth under Section 2(b) hereof and the COBRA subsidies (defined
below), if applicable.
In the event of death, such payments shall be made to Xxxxx'x spouse, if
then living, and if Xxxxx'x spouse is not then living, said payments shall be
paid to Xxxxx'x estate. Other than the foregoing, Egghead shall have no further
obligation to Xxxxx'x estate under this Agreement in the event of his death.
In the event Xxxxx becomes totally disabled (as herein defined) prior to
the end of the Severance Period and provided he has not already procured
alternative employment as herein defined, then the severance payments set forth
under Section 2(a) otherwise payable to Xxxxx shall be continued for the entire
Severance Period. If Xxxxx is receiving extension payments under Section 2(b)
and Xxxxx becomes totally disabled prior to the end of the Extension Period, and
provided he has not procured alternative employment as herein defined, then the
extension payments set forth under Section 2(b) otherwise payable to Xxxxx shall
be continued for the entire Extension Period. Notwithstanding the foregoing,
Egghead shall have no obligation to make any payments pursuant to the preceding
two sentences unless Egghead has received proof to its satisfaction that Xxxxx
has suffered a total disability. For purposes of this Agreement, total
disability shall mean an illness or physical or mental incapacity that prevents
Xxxxx from seeking or procuring alternative employment. Proof of such
disability shall be supplied by Xxxxx in the form of a written letter of Xxxxx'x
physician stating that in the physician's opinion Xxxxx is physically or
mentally incapable of seeking or procuring alternative employment. Egghead
shall have the right to have
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Xxxxx examined by a physician of Egghead's choice, solely at Egghead's expense,
to render an opinion as to whether or not Xxxxx is physically or mentally
incapable of seeking or procuring alternative employment. In the event the
physician selected by Xxxxx and the physician selected by Egghead render
contrary opinions, the issue of whether Xxxxx is physically or mentally
incapable of seeking or procuring alternative employment may be submitted by
Egghead to arbitration under Washington law, and the decision of such
arbitration shall be final and binding on all parties. So long as any payments
are made to Xxxxx, Egghead will also continue to make COBRA subsidies as herein
described, if applicable. Other than the foregoing, Egghead shall have no
further obligation to Xxxxx under this Agreement in the event of his total
disability.
3. EMPLOYEE BENEFIT PROGRAMS.
(a) STOCK OPTIONS. Egghead and Xxxxx agree that there are two groups of
stock options which Xxxxx has had certain rights to exercise. The first group
pertains to nonqualified stock options to purchase 3,000 shares of common stock
of Egghead, Inc. at an exercise price of $12.75 per share, to purchase 3,000
shares of common stock of Egghead, Inc. at an exercise price of $13.75 per
share, and to purchase 6,000 shares of common stock of Egghead, Inc. at an
exercise price of $17.00 per share, all of which were granted pursuant to
Egghead Inc.'s 1986 Combined Incentive and Non-Qualified Stock Option Plan,
Amended and Restated as of July 15, 1992 (the "1986 Plan"), and all of which are
vested (collectively, the "Vested 1986 Plan Options"). Pursuant to the 1986
Plan, Xxxxx may only exercise the Vested 1986 Plan Options prior to the
expiration of three months after the Date of Resignation. The second group
pertains to a nonqualified stock option to purchase 25,000 shares of common
stock of Egghead, Inc. at an exercise price of $6.1875 per share, of which
rights to purchase 12,500 shares are vested, and a nonqualified stock option to
purchase 20,000 shares of common stock of Egghead, Inc. at an exercise price of
$10.75 per share, of which rights to purchase 3,334 shares are vested (such
vested portion to purchase 3,334 shares, together with the vested portion to
purchase 12,500 shares, the "Vested 1993 Plan Options"), both of which options
were granted pursuant to Egghead Inc.'s 1993 Stock Option Plan (the "1993
Plan"). Egghead, Inc. agrees to provide Xxxxx eighteen months from the Date of
Resignation to exercise the Vested 1993 Plan Options. Egghead, Inc. and Xxxxx
expressly agree that there shall be no further vesting of any options held by
Xxxxx beyond the Date of Resignation. Subject to the foregoing, Xxxxx'x
exercise of the Vested 1986 Plan Options and the Vested 1993 Plan Options shall
be in compliance with the provisions of the 1986 Plan and the 1993 Plan,
respectively, and with the provisions of Section 16 of the Securities Exchange
Act of 1934, as amended. Any change to the 1986 Option Plan or the 1993 Option
Plan shall not adversely affect Xxxxx'x rights under this Section 3(a).
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(b). COBRA. Except as expressly provided in this Agreement, all benefits
and perquisites, original, remaining or otherwise, to which Xxxxx may have had
an entitlement as of immediately prior to the Date of Resignation shall cease
effective the Date of Resignation. At his election, Xxxxx and his family may
continue to participate in Egghead's medical and dental benefit plans governed
by the Comprehensive Omnibus Budget Reconciliation Act ("COBRA") for the time
period provided in COBRA. Egghead will subsidize the cost of such coverage at
the level in effect for Xxxxx and his family as of the Date of Resignation until
Xxxxx commences alternative employment or the end of the Extension Period,
whichever occurs first. Xxxxx will pay the balance of such cost, if any.
4. REFERENCES. Upon request, Egghead will provide a letter of
recommendation for Xxxxx containing his dates of employment and pay confirmation
only. Unless authorized by Xxxxx in writing, Egghead's response to any inquiry
from third parties regarding Xxxxx'x employment with Egghead shall be limited to
this same information.
5. RELOCATION EXPENSES. Egghead shall reimburse Xxxxx for the cost of
relocating Xxxxx'x residence to any place outside Spokane County, Washington, up
to a total amount not to exceed $40,000 promptly after receipt of valid receipts
submitted by Xxxxx for the cost of moving household goods and for costs related
to the sale of his Spokane residence. No other relocation expenses shall be
reimbursed. Egghead has no obligation to reimburse or pay Xxxxx any amount with
respect to any decrease in the value of Xxxxx'x residential property from the
amount paid by Xxxxx to purchase such residential property. No reimbursement
under this Section 5 will be made after sixty (60) days from the date of Xxxxx'x
final xxxxxxxxx or extension payment, as the case may be, received in accordance
with the provisions of Section 2 hereof.
6. NON-DISPARAGEMENT. Xxxxx agrees not to make any disparaging or
derogatory remarks, comments or statements about Egghead and its officers,
directors, and employees, or any of them, at any time. Egghead agrees not
to, and will instruct its current officers, directors and senior management
not to, make any disparaging or derogatory remarks, comments or statements
about Xxxxx at any time.
7. CONFIDENTIALITY, NON-SOLICITATION, AND NON-COMPETITION.
(a) NON-DISCLOSURE. Except as required by applicable law or regulation
and except as may be required to insure compliance with the terms of this
Agreement, Egghead and Xxxxx agree to keep the terms of this Agreement
confidential; provided, that Xxxxx may share its provisions with
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his spouse, attorneys, and professional advisors, who will be informed of and
bound by this confidentiality obligation, and Egghead may share its provisions
with its senior management, attorneys, and professional advisors, who will be
informed of and bound by this confidentiality obligation. Xxxxx agrees not to
use or disclose any confidential information. As used herein, "confidential
information" means all trade secrets, non-public information, methods,
strategies, practices, computer programs and systems, research and related
documentation, customer lists and other data, marketing plans, financial
information, and all other compilations of information that relate in any manner
to the business of Egghead, any of the direct or indirect subsidiaries of
Egghead, Inc., or Egghead SSI, LLC d/b/a Egghead Computer Surplus (such
subsidiaries, together with Egghead SSI, LLC d/b/a Egghead Computer Surplus, the
"Affiliate Entities") or any of them. Xxxxx acknowledges that all confidential
information is the proprietary and confidential property of Egghead or the
Affiliate Entities. Xxxxx further agrees to return all tangible items
containing such confidential information, wherever located and in whatever form,
in addition to all other property belonging to Egghead or the Affiliate
Entities, on or before the Date of Resignation.
(b) NON-SOLICITATION. Xxxxx agrees that during the Severance Period he
will not individually, or in conjunction with any other person, corporation or
other entity, in any capacity, directly or indirectly, (i) solicit or recruit
any employee of or consultant to Egghead or any of the Affiliate Entities or
(ii) cause or seek to cause (A) any employee of or consultant to Egghead or any
of the Affiliate Entities to terminate his or her employment or consulting
relationship with Egghead or any of the Affiliate Entities or (B) any customer,
client or vendor of Egghead or any of the Affiliate Entities to alter or
terminate any business relationship with Egghead or any Affiliate Entities.
(c) NON-COMPETITION. For a period of eighteen months from the Date of
Resignation, Xxxxx shall not, directly or indirectly, be employed by, own,
manage, operate, join, control or participate in the ownership, management,
operation or control of or be connected with", (as that phrase is described
below), any person or entity engaged in any operations in competition with
Egghead or any of the Affiliate Entities in the retail sale of computer software
or computer hardware, or both, through stores, mail order, telephonic means or
electronic commerce, including, without limitation, through the Internet;
provided, however, that for purposes of this Section 7(c) the following shall be
deemed to be persons or entities not engaged in operations in competition with
Egghead or any of its Affiliate Entities: (i) any person or entity if its
sales of computer software and computer hardware constitute less than ten (10)
percent of its total revenues and of the total revenues of the division, if any,
of that person or entity the primary purpose
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of which is the sale of computer software or computer hardware, or both; (ii)
any person or entity that is a software publisher or hardware manufacturer
provided that it sells only products that it develops or manufacturers; and
(iii) any person or entity that is an importer of computer hardware provided
that it sells only computer hardware. The Board of Directors of Egghead, Inc.
may, in its sole discretion, release Xxxxx from any or all of his obligations
pursuant to this Section 7(c), provided that such release shall not be effective
unless in writing. Xxxxx shall be deemed to "be connected with" such business
if such business is carried on by a partnership, corporation or association of
which he is an officer, director, employee, partner, member, consultant or
agent; provided, however, that nothing herein shall prevent the purchase or
ownership by Xxxxx of shares which constitute less than 2% of the outstanding
equity securities of a publicly or privately held corporation.
(d) VIOLATION. Xxxxx acknowledges that his confidentiality,
non-solicitation and non-competition obligations under this Section 7 are
material inducements to Egghead in entering into this Agreement, that his
violation thereof shall constitute a material breach of this Agreement and
Egghead's Code of Ethics, and that any disclosure or action by Xxxxx in
violation of this Section 7 will cause serious and irreparable injury to Egghead
for which there is no adequate remedy at law. If, upon investigation, Egghead
in its discretion determines that Xxxxx is in violation of this Section 7, then
Egghead will give Xxxxx written notice of the violation, and if Xxxxx shall not
have cured such violation within four business days of such notice, as
determined in the sole discretion of Egghead, then Egghead may retain as
liquidated damages the balance of the payments coming due Xxxxx under Section 2
hereof, if any, and may obtain immediate and permanent injunctive relief in any
court of competent jurisdiction. The rights and remedies set forth in this
Section 7 are in addition to all other legal, equitable and contractual rights
and remedies available to Egghead.
8. REPRESENTATIONS AND WARRANTIES.
(a) BY XXXXX. Xxxxx hereby represents and warrants as follows:
(i) That, to the best of his knowledge, as of the Date of
Resignation, there is no litigation or claim of any kind pending or
contemplated in any court or before any governmental authority or
regulatory body or arbitrator, pertaining to acts or omissions that
occurred within the scope of his employment as an officer of Egghead and
that he knows of no facts or circumstances that would give rise to such
litigation or claim.
(ii) That he has reviewed this Agreement with independent legal
counsel, that the terms of this Agreement have been negotiated
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in good faith at arms' length, that he has read and understands the terms
of this Agreement and the consequences thereof, and that he enters into
this Agreement as his free, voluntary and independent act.
(b) BY EGGHEAD. Egghead represents and warrants as follows:
(i) That, to the best of its knowledge, as of the Date of
Resignation, there is no litigation or claim of any kind pending or
contemplated in any court or before any governmental authority or
regulatory body or arbitrator, pertaining to acts or omissions that
occurred within the scope of Xxxxx'x employment as an officer of Egghead,
and that it knows of no facts or circumstances that would give rise to such
litigation or claim.
(ii) That it is a Washington corporation duly authorized and validly
existing under the laws of the State of Washington;
(iii) That this Agreement and the obligations and undertakings arising
hereunder constitute the valid, binding and enforceable obligations of
Egghead; and
(iv) That it will promptly inform its officers, director and senior
managers of its obligations under the relevant sections of this Agreement.
9. MUTUAL RELEASE. In consideration of the benefits and payments provided
to Xxxxx in this Agreement, and as a material inducement to Egghead to enter
into this Agreement, Xxxxx, individually and for his marital community, heirs,
personal representatives, successors and assigns (collectively "Xxxxx
Releasees"), releases and forever discharges Egghead and the Affiliated
Entities, including any and all of Egghead's and each Affiliated Entity's
affiliates, shareholders, officers, directors, representatives, agents, and
employees, each of their successors and assigns, and each of them (collectively,
the "Egghead Releasees"), from any and all Claims (as defined below) that Xxxxx
may have against any of the Egghead Releasees as of the Date of Resignation.
The Egghead Releasees release and forever discharge the Xxxxx Releasees, from
any and all Claims (as defined below) that any of the Egghead Releasees may have
against any of the Xxxxx Releasees as of February 15, 1997. "Claims" as used in
this Section 9 is defined to mean any and all claims, demands, charges,
liability, causes of action, and damages, including without limitation,
attorneys' fees and costs actually incurred, known or unknown, including without
limitation, any and all claims, rights, demands, and causes of action for breach
of any employment contract or agreement (whether express or implied, written or
oral), wrongful discharge, intentional and/or negligent infliction of emotional
distress, defamation,
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invasion of privacy, tort claims, discrimination on the basis of marital status,
race, sex, national origin, color, religion, handicap or disability,
retaliation, violation of public policy, and violation of any and all federal,
state and/or local statutes, laws, rules, regulations and/or ordinances,
including, but not limited to, Title VII of the Civil Rights Act of 1964, as
amended, Sections 1981 through 1988 of Title 42 of the United States Code, as
amended, The National Labor Relations Act, as amended, The Employee Retirement
Income Security Act of 1974, as amended, The Americans with Disabilities Act of
1990, as amended, The Family and Medical Leave Act of 1993, The Age
Discrimination in Employment Act of 1967 ("ADEA"), as amended, The Washington
State Wage and Hour Laws, and The Washington Law Against Discrimination, Ch.
49.60 RCW, as amended; except that the term "Claims" does not include: (i) any
claims for indemnification pursuant to Article IX of the Bylaws of Egghead, Inc.
that Xxxxx may have as a former officer of Egghead or pursuant to policies of
insurance held by Egghead, if any, that provide coverage for liability of former
officers and directors of Egghead; (ii) any claims based on rights created by
this Agreement; and (iii) any claims where the events in dispute first arise
after the date of this Agreement.
10. TAX LIABILITY. Some or all of the payments and benefits which Xxxxx may
receive hereunder may be deemed income and taxable to Xxxxx under relevant
provisions of the Internal Revenue Code of 1986, as amended, and other federal,
state, and local statutes and regulations (collectively "Codes"). Xxxxx is
advised that Egghead does not "gross up" benefits paid to or on behalf of its
employees. Xxxxx shall have sole responsibility to determine and, to the extent
any withholdings made by Egghead hereunder are insufficient, to pay, and shall
indemnify and hold Egghead harmless from, all taxes coming due under such Codes.
This hold harmless and indemnity obligation covers only those taxes which, in
the ordinary course, would normally be obligations of or paid by Xxxxx.
11. NONADMISSION CLAUSE. This Agreement shall not be construed as an
admission by either party of any liability to the other party, breach of any
agreement between the parties, or violation by either party of any statute, law,
rule or regulation.
12. CONSIDERATION/REVOCATION PERIOD. Xxxxx acknowledges that he has been
informed of his right to fully consider the terms of this Agreement for a period
not to exceed twenty-one (21) days pursuant to applicable provisions of the
ADEA. If Xxxxx chooses to execute this Agreement, he shall have an additional
seven (7) days after signing this Agreement to revoke it by providing written
notice thereof to Egghead.
13. SEVERABILITY. If any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions shall nevertheless
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continue to be valid and enforceable to the maximum extent consistent with
applicable law.
14. COMPLETE AGREEMENT. This Agreement contains the entire understanding
and agreement between the parties in connection with its subject matter and
supersedes any and all other prior and contemporaneous oral or written
agreements, understandings, or representations between the parties pertaining
to same. This Agreement cannot be altered except in a writing signed by
Xxxxx and an authorized representative of Egghead.
15. FURTHER ASSURANCES. The parties agree to execute any further documents
and instruments as may be reasonably necessary to fully carry out the terms
and conditions of this Agreement.
16. ARBITRATION. Except as set forth under Section 2(c) hereof, any
controversy or claim arising out of this Agreement shall be resolved by
arbitration pursuant to this paragraph and the then current rules and
supervision of the American Arbitration Association ("AAA"); provided, Egghead
may obtain the relief set forth in Section 7 hereof in addition to any
resolution of such claim or controversy by arbitration as provided herein. The
arbitration shall be held in Spokane before a single arbitrator either mutually
agreed upon by the parties or selected in accordance with AAA Rules. The
arbitrator shall have no authority to add to, subtract from, or modify any of
the terms of this Agreement. The arbitrator's decision shall be final and
binding upon the parties hereto and may be entered in any court having
jurisdiction.
17. NOTICES. All notices, requests, payments and other communications required
or permitted to be given hereunder shall be in writing and shall be delivered by
overnight courier or sent postage prepaid by the United States certified mail,
return receipt requested, to the addressee's mailing address as hereafter set
forth:
If to Egghead: Egghead, Inc.
00000 Xxxx Xxxxxxx
Xxxxxxx xxxx, XX 00000
Attention: Legal Department
If to Xxxxx: Xxxxxx X. Xxxxx
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Any party hereto may, by proper notice to the other parties, designate such
other address with the giving of notice as required hereunder. Any notice shall
be deemed given on the first day following the date such notice is
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sent by overnight courier or on the third day following the date such notice is
mailed in accordance with this Agreement.
18. BINDING AGREEMENT. This Agreement shall bind and inure to the benefit of
the parties and their respective heirs, personal representatives, marital
communities, related entities, shareholders, officers, directors, employees,
agents, attorneys, successors and assigns, except that Xxxxx may not assign any
of his rights or delegate any of his duties hereunder without the prior written
consent of Egghead.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington without application of the
principles of conflicts of laws, and venue for any proceeding hereunder shall be
in Spokane County, Washington.
20. COUNTERPARTS. This Agreement may be executed on separate counterparts,
any one of which need not contain signatures of more than one party, but all
of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EGGHEAD, INC.
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxx X. Xxxxx
------------------------- ---------------------------------------
Xxxxxx X. Xxxxx By: Xxxxxx X. Xxxxx, Chairman of the
Board of Directors
D J & J SOFTWARE CORPORATION
/s/ Xxxxxx X. Xxxxx
---------------------------------------
By: Xxxxxx X. Xxxxx
-----------------------------------
Its Chairman of the Board of Directors
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