EXHIBIT 10.1
SEPARATION, CONSULTING AND GENERAL RELEASE AGREEMENT
This Separation, Consulting and General Release Agreement (this
"Agreement") is being entered into by and between Source Interlink Companies,
Inc. ("Source" or the "Company") and S. Xxxxxx Xxxxxx ("Xxxxxx") (collectively,
the "Parties") as of the date of Xxxxxx'x execution of this Agreement (the "Date
of this Agreement"), subject to the provisions of Section 6(b) below.
WHEREAS, Xxxxxx was employed by the Company pursuant to an Employment
Agreement dated as of March 1, 2005 (the "Employment Agreement");
WHEREAS, subject to the provisions of Section 6(b) below, the Parties
wish to terminate their employment relationship and the Employment Agreement on
mutually acceptable terms and conditions effective as of November 10, 2006; and
THEREFORE in consideration of the foregoing promises and the terms and
conditions set forth below, the Parties agree as follows:
1. Termination; Resignation from Board. Subject to the provisions of
Section 6(b) below, Xxxxxx acknowledges the termination of his employment from
any and all positions within the Company or any of its affiliates, as an
employee, officer and/or director (or any comparable position) effective as of
November 10, 2006 (the "Termination Date"), and hereby resigns from such
positions. Subject to the provisions of Section 4 below, Xxxxxx understands that
he is giving up any right or claim to compensation or benefits of employment
with the Company beyond the Termination Date, including without limitation, any
compensation, benefits or other rights under the Employment Agreement, except
that he shall be entitled to the compensation and benefits provided in this
Agreement and to payment of his annual bonus for 2006 in the amount of Nine
Hundred Thousand Dollars and Zero Cents ($900,000.00), less applicable
withholding. Such annual bonus will be payable in 2007 when other senior
management bonuses are paid, but in no event later than March 15, 2007. Subject
to the provisions of Section 6(b) below, Xxxxxx resigns, effective as of the
Termination Date, as a director of the Company and Chairman of the Board of
Directors of the Company.
2. Severance Payments. Provided that Xxxxxx timely signs and delivers,
and does not revoke, this Agreement, Xxxxxx shall be paid Four Million Six
Hundred Thousand Dollars and Zero Cents ($4,600,000.00) as a lump sum severance
payment, on May 21, 2007. In addition, Xxxxxx shall continue to have use of his
current leased automobile at Company expense for the balance of the lease,
provided, however, that Xxxxxx shall pay the lease costs for the first six (6)
months of the Term (as "Term" is defined in Section 3(a) below), and the Company
shall reimburse him for such payments on May 21, 2007. All remaining lease
payments after the first six (6) months of the Term will be paid by the Company
directly.
3. Consulting Agreement. Provided that Xxxxxx timely signs and
delivers, and does not revoke, this Agreement, Xxxxxx shall become a consultant
to the Company upon the terms set forth herein.
a. Term. The term of Xxxxxx'x consulting arrangement shall
begin on the Termination Date and end on the third anniversary of the
Termination Date, unless earlier terminated by the Company for "Cause" or due to
Xxxxxx'x death or disability (the "Term").
For purposes of this Agreement, "Cause" shall mean a determination by
the Board of Directors of the Company (the "Board") that:
(1) Xxxxxx has been convicted of or pleaded nolo
contendere to a felony;
(2) Xxxxxx has at any time stolen, embezzled or
misappropriated any money, property or assets (tangible or intangible) of the
Company or its affiliates (de minimus personal use of office supplies,
equipment; or company services shall not constitute "Cause");
(3) Xxxxxx has failed to comply with polices of the
Company or any laws, rules or regulations applicable to Xxxxxx or the Company,
and has failed or refused to correct such failure within thirty (30) days after
written notice of such failure;
(4) Xxxxxx has failed to fulfill his substantive
duties and responsibilities as set forth in Section 3(c) of this Agreement in
any material respect, and has failed or refused to correct such failure within
thirty (30) days after written notice of such failure;
(5) Xxxxxx has failed to comply with any lawful
direction of the Board, the Chairman of the Board, the Chief Executive Officer
of the Company or such senior-level executive(s) as the Board and/or, the
Chairman of the Board or Chief Executive Officer may designate from time to time
to direct Xxxxxx'x services; or
(6) Xxxxxx has materially breached any term of this
Agreement, including without limitation, any violation of the restrictions set
forth or referred to in Sections 9, 10, 11, 12, 13, 14, 15 and 16 of this
Agreement, which (if remediable) Xxxxxx has failed or refused to correct within
thirty (30) days after written notice of such breach.
The Company acknowledges that no facts disclosed prior to the date of
this Agreement to the Shareholder Designated Directors (as defined in the
Stockholder's Agreement dated February 28, 2005) either in writing or during
Board of Directors meetings constitute
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"Cause" for terminating this Agreement; provided, however, that such
acknowledgement is only effective to the extent any such facts were fully and
accurately disclosed.
"Disability" shall mean a determination by the Board that
Xxxxxx has been unable to perform consulting services effectively for ninety
(90) or more consecutive days, or for one hundred twenty (120) or more days in
any calendar year.
In the event of a termination of Xxxxxx'x consulting services
for "Cause", the Company shall notify Xxxxxx in writing of the date of such
termination, and the grounds for such termination. In the event of a termination
of Xxxxxx'x consulting services for "Cause," Disability," or death, the Company
shall have no further obligation to provide any future payments or benefits
pursuant to this Agreement after the Termination Date, except the Company shall
remain obligated to pay the $900,000.00 annual bonus as set forth in Section 1,
the $4,600,000.00 severance payment as set forth in Section 2, any un-reimbursed
automobile expenses incurred during the Term as set forth in Section 2, any
Earned but Unpaid Monthly Fee as set forth in Section 3(d), any Earned but
Unpaid Joint Venture Bonus as set forth in Section 3(e)(1), any Earned but
Unpaid Magazine Bonus as set forth in Section 3(e)(2), any Earned but Unpaid
Music Bonus as set forth in Section 3(e)(3), reimbursement for healthcare
insurance paid by Xxxxxx during the Term as set forth in Section 3(g), any
un-reimbursed expenses incurred during the Term as set forth in Section 3(h),
and any Earned but Unpaid payment under Section 5.5. For purposes of this
Section 3(a) and Section 13(c) below, "Earned but Unpaid" with respect to the
bonuses provided for in Section 3(e)(1), (2) and (3) shall mean that all events
required to have occurred for Xxxxxx to be entitled to payment of a bonus have
occurred during the Term and within the time frames required under Sections
3(e)(1), (2) and/or (3), as applicable, but the bonus has not yet been paid. For
purposes of this Section 3(a) and Section 13(c) below, "Earned but Unpaid" with
respect to the Monthly Fee shall mean the unpaid Monthly Fee multiplied by the
number of completed months of service during the Term. With respect to any
payment under Section 5.5, "Earned but Unpaid" shall mean an Excise Tax Gross-Up
Payment under Section 5.5 with respect to payments under this Agreement, made to
Xxxxxx during the Term or that are Earned but Unpaid during the Term, that are
subject to the Excise Tax. Notwithstanding any provision of this paragraph, in
the event that Xxxxxx'x consulting services were terminated for "Cause" or
"Disability" or Xxxxxx died in the middle of a month, Xxxxxx shall be paid a
portion of the Monthly Fee, defined in Section 3(d) below, for that month,
pro-rated in accordance with Section 3(d).
b. Reporting Relationship. Xxxxxx shall report to the
Board, the Chairman of the Board and the Chief Executive Officer of the Company
or such senior-level executive(s) as the Board and/or the Chairman of the Board
or Chief Executive Officer may designate from time to time.
c. Duties. The Company hereby appoints Xxxxxx as an
independent consultant to the Company, and Xxxxxx hereby accepts such
appointment. During the Term, Xxxxxx shall provide such consulting services to
the Company and its subsidiaries, during normal business hours, as the Board of
Directors or the Chairman of the Board or the Chief Executive Officer of the
Company may reasonably request, from
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time to time, in connection with (among other things) high-level strategic
planning, merger and acquisition transactions, investor relations, customer
relations, contract negotiation, litigation, financial affairs, operations and
executive recruitment, including, without limitation, assisting the Company in
the formation of strategic ventures, negotiating agreements with certain
prospective customers and assisting the Company in any and all respects with the
pursuit or defense of any investigations, claims, disputes or litigation. This
Agreement does not create any employment or agency relationship between Xxxxxx
and the Company. The relationship of Xxxxxx during the Term will be solely as an
independent contractor to the Company. The Company has not authorized Xxxxxx to,
and Xxxxxx acknowledges that he has no authority to, commit, bind or speak for
the Company, and Xxxxxx shall not knowingly do any act which might cause any
third party to reasonably believe that Xxxxxx has the power or authority to
contract or incur any commitment on behalf of Company, or that Xxxxxx is an
employee or agent of Company.
d. Consulting Fees. Subject to Section 5 below, Xxxxxx shall
be paid Eighty Three Thousand Three Hundred Thirty Three Dollars Thirty Three
Cents ($83,333.33) per calendar month during the Term (the "Monthly Fee"). The
Monthly Fee shall be paid in accordance with, and on such dates as, base
compensation is paid to senior executive employees of the Company; provided
however, that the Monthly Fee for the first six months of the Term shall be paid
on May 21, 2007. To the extent that the Term begins and/or ends in the middle of
a calendar month, Xxxxxx shall be paid a portion of the Monthly Fee determined
by multiplying the Monthly Fee by a fraction the numerator of which is the
number of days in that month that fall within the Term and the denominator of
which is the total number of days in that month.
e. Consulting Bonus Payments. Xxxxxx shall be eligible for
three bonus payments during the Term:
(1) Joint Venture Bonus. If prior to the eighteen
(18) month anniversary of the Date of this Agreement, the Company enters into
definitive agreement(s) regarding a joint venture with the parties listed on
Schedule 1 hereto then within fifteen (15) business days after entering into
such definitive agreement(s), the Company shall, subject to Section 5 below, pay
Xxxxxx One Million Dollars and Zero Cents ($1,000,000.00);
(2) Magazine Bonus. If prior to the twelve (12) month
anniversary of the Date of this Agreement, the Company enters into the
definitive agreement(s) described on Schedule 2 , then within fifteen (15)
business days after entering into such definitive agreement(s), the Company
shall, subject to Section 5 below, pay Xxxxxx One Million Dollars and Zero Cents
($1,000,000.00); and
(3) Music Bonus. If the Company enters into the
definitive agreement(s) described on Schedule 3, then within the time period
referenced on Schedule 3, the Company shall, subject to Section 5 below, pay
Xxxxxx bonuses totaling up to Two Million Dollars and Zero Cents
($2,000,000.00).
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The Company shall have sole and absolute discretion to
determine whether or not to pursue the joint venture or agreement(s) referenced
above and nothing in this Agreement shall be interpreted to obligate the Company
to pursue such agreement(s) or approve or agree to any joint venture or
agreement(s) referenced above. If the Company pursues such joint venture or
agreement(s), then the Company shall have sole and absolute discretion to accept
or reject any proposed terms related thereto and to elect not to enter into any
definitive agreement(s). If the Company elects for any reason not to pursue the
joint venture or agreement(s) referenced above, or pursues but ultimately elects
for any reason not to enter into definitive agreement(s) within the time periods
referenced above, the Company shall have no liability to Xxxxxx and no
obligation pay Xxxxxx any of the bonus payments referenced above.
f. Office Facility and Support. Until the first
anniversary of the Date of the Agreement, the Company shall provide Xxxxxx with
an office and an assistant. The office shall be at the Company's headquarters or
a location that the Company determines to be suitable for Xxxxxx'x performance
of his consulting services required under this Agreement. Notwithstanding the
forgoing, if before the first anniversary of the Date of this Agreement, the
proposed joint venture describe in Section 3(e)(i) provides Xxxxxx with an
office and assistant, then the Company shall be relieved of its obligation under
this Section 3(f) to do so.
g. Healthcare Insurance. During the Term, the Company
shall provide, at the Company's expense, Xxxxxx with healthcare insurance
substantially similar to that provided to Xxxxxx immediately prior to the
execution of this Agreement. Provided, however, that Xxxxxx shall pay the costs
of such participation for the first six months of the Term, and the Company
shall reimburse Xxxxxx for such payments on May 21, 2007. To accomplish this
provision, the Company shall, if practicable, provide for Xxxxxx'x participation
in the Company's healthcare insurance plan. In the event that the Company cannot
include Xxxxxx in the Company's healthcare insurance plan, the Company may
satisfy a part of its obligations under this Section by paying Xxxxxx'x COBRA
premium so long as he remains eligible for COBRA benefits during the Term;
provided, however, that Xxxxxx shall pay the costs of such participation for the
first six (6) months of the Term, and the Company shall reimburse him for such
payments on May 21, 2007. In the event that the Term extends beyond the COBRA
coverage period, the Company shall arrange for healthcare insurance for Xxxxxx
substantially similar to the coverage provided under the Company's plan then in
effect, at the Company's expense. In the event that it is not practicable for
the Company to arrange for healthcare coverage substantially similar to coverage
provided under the Company's plan after the expiration of the COBRA period,
Xxxxxx agrees to enroll in Medicare and the Company agrees to provide, at the
Company's expense, Medicare supplemental insurance to Xxxxxx. Such Medicare and
Medicare supplemental insurance to provide, to the extent practicable, coverage
for Xxxxxx substantially similar to the coverage provided under the Company's
plan then in effect. Notwithstanding the foregoing, if Xxxxxx becomes eligible
for healthcare benefits under a plan or program of the joint venture described
in Section 3(e)(1), the Company shall be relieved of its obligation under this
Section 3(g) at such time as Xxxxxx becomes eligible for such healthcare
benefits. The Company's obligations
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under this Section 3(g) shall be contingent upon Xxxxxx'x reasonable cooperation
with any application or other process necessary to secure insurance.
h. Except as set forth in Section 3(g), Xxxxxx
acknowledges that during the Term and as an independent contractor, Xxxxxx will
not be eligible for or receive any benefits for which employees of the Company
are eligible. Notwithstanding the above, the Parties anticipate that Xxxxxx will
assume responsibility and pay for the Two Million Dollar and Zero Cent
($2,000,000.00) ten year term life insurance policy issued by Banner Life
(policy number 17B812262) and/or the One Million Dollar and Zero Cent
($1,000,000.00) ten year term life insurance policy issued by United of Omaha
(policy number Bu1053878). The Company hereby agrees to reasonably cooperate
with Xxxxxx to effectuate his assumption of responsibility for one or both of
these policies.
i. Expense Reimbursement. The Company shall pay
directly, or shall reimburse for, reasonable and necessary expenses approved in
advance by the Company's Chief Financial Officer and incurred by Xxxxxx during
the Term in the interest of the business of the Company. In the event Xxxxxx is
required to travel to perform his duties under Section 3(c) of this Agreement,
his travel expenses and accommodations shall be consistent with Company's
regular practices for reimbursing senior executives' travel. All such expenses
paid by Xxxxxx shall be promptly reimbursed by the Company upon presentation by
Xxxxxx of an itemized account of such expenditures, sufficient to support their
deductibility by the Company for federal income tax purposes (without regard to
whether or not the Company's deduction for such expenses is limited for federal
income tax purposes), such submissions to be made within thirty (30) days after
the date such expenses are incurred.
4. Sole Financial Obligation. The compensation and benefits
set forth in Sections 1, 2 and 3 of this Agreement are the sole and exclusive
financial obligations of the Company to Xxxxxx under this Agreement or otherwise
in connection with Xxxxxx'x employment, consulting, or the termination of his
employment or consulting. Notwithstanding the above, Xxxxxx'x rights under any
applicable retirement, 401k, pension, stock, stock option, restricted stock
plan, the Company's Nonqualified Excess Plan effective January 1, 1997 and the
Company's Deferred Compensation Plan effective July 1, 2005 shall not be
modified by this Agreement, and his rights shall be consistent with the
provisions of such plans and agreements entered into pursuant to those plans.
Xxxxxx understands that, leaving aside any rights under any applicable
retirement, 401k, pension, stock, stock option, restricted stock plan, the
Company's Nonqualified Excess Plan effective January 1, 1997 or the Company's
Deferred Compensation Plan effective July 1, 2005 and leaving aside Xxxxxx'x
right to indemnification under applicable law and the Company's articles and
bylaws for claims brought against him arising out of his service as an officer
and/or director of the Company and its subsidiaries and affiliates, he is
otherwise giving up any and all rights and benefits of employment.
5. Tax Withholding. The Company shall withhold from any
payment or benefit under Sections 1 and 2 of this Agreement any and all
withholding taxes it believes are required by applicable law, and to otherwise
take all actions it believes necessary to satisfy it
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obligations to pay such withholding taxes. With regard to payment and benefits
provided under Section 3 of this Agreement, because Xxxxxx will serve as an
independent contractor, the Company will not withhold any state or federal FICA
or other withholding taxes, social security taxes, Medicare taxes, disability or
other insurance payments or any other taxes, assessments or payments
(collectively, "Employment Taxes"). The Company will issue to Xxxxxx an Internal
Revenue Service Form 1099 at the time, in the manner and containing the
information required by the Internal Revenue Code of 1985, as amended (the
"Code"). Xxxxxx is solely responsible for the payment of any and all Employment
Taxes and any other taxes, assessments or payments owed in connection with its
receipt of compensation paid by Company hereunder.
5.5. Excise Tax.
a. If any of the amounts Xxxxxx would receive under
this Agreement will be subject to the tax imposed by Section 4999 of the Code,
(the "Excise Tax") (or any similar tax that may hereafter be imposed), the
Company shall also pay to Xxxxxx in cash an additional amount (the "Excise Tax
Gross-up Payment") such that the net amount retained by Xxxxxx, after deduction
from payments received pursuant to this Agreement (the "Affected Payments") and
the Excise Tax Gross-up Payment of any Excise Tax imposed upon the Affected
Payments and any federal, state, local and other taxes (including income taxes,
payroll taxes, Excise Tax and any other taxes) imposed upon the Excise Tax
Gross-up Payment, shall be equal to the original amount of the Affected
Payments, prior to deduction of any Excise Tax imposed with respect to the
Affected Payments. The Excise Tax Gross-up Payment is intended to place Xxxxxx
in the same economic position he would have been in if the Excise Tax did not
apply. For purposes of determining the Excise Tax Gross-up Payment pursuant to
this Agreement, the Affected Payments shall also include any amounts which would
be considered "parachute payments" (within the meaning of Section 280G(b)(2) of
the Code) to Xxxxxx paid pursuant to this Agreement such that the Company will
absorb the full cost of any Excise Tax thereon and all taxes relating to the
Company's absorption of any Excise Taxes.
b. For purposes of determining the amount of the
Excise Tax Gross-up Payment, Xxxxxx shall be deemed to pay Federal income taxes
at the highest marginal rate of Federal income taxation in the calendar year in
which the Excise Tax Gross-up Payment is to be made, and state and local income
taxes at the highest marginal rate of taxation in the state and locality of
Xxxxxx'x residence on the date of termination, net of the maximum reduction in
Federal income taxes which could be obtained from deduction of such state and
local taxes.
c. Subject to any determinations made by the Internal
Revenue Service (the "IRS"), all determinations as to whether an Excise Tax
Gross-up Payment is required and the amount of the Excise Tax Gross-up Payment
and the assumptions to be used in arriving at the determination shall be made by
the Company's independent, certified public accountants or other person selected
by them (the "Accountants"). All fees and expenses of such determination will be
borne by the Company. Subject to any other determination made by the IRS, the
determination of the Accountants under this Agreement with respect to (i) the
initial amount of any Excise Tax Gross-up Payment, and (ii) any subsequent
adjustment of such payment shall be binding on the Company and Xxxxxx.
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d. The Excise Tax Gross-up Payment calculated
pursuant to this Agreement above shall be paid no later than the thirtieth (30)
day following an event occurring that subjects Xxxxxx to the Excise Tax;
provided, however, that if the amount of such Excise Tax Gross-up Payment or
portion thereof can not be reasonably determined on or before such day, then the
Company shall pay to Xxxxxx the amount of the Excise Tax Gross-up Payment no
later than ten (10) days following the determination of the Excise Tax Gross-up
Payment by the Accountants, or the IRS, as the case may be.
e. Notwithstanding the foregoing, however, the Excise
Tax Gross-up Payment shall be paid to or for the benefit of Xxxxxx no later than
fifteen (15) business days prior to the date on which Xxxxxx is required to pay
the Excise Tax or any portion of the Excise Tax Gross-up Payment to any federal,
state or local taxing authority, without regard to extensions.
f. In the event the Excise Tax is subsequently
determined to be less than the amount taken into account hereof at the time the
Excise Tax Gross-up Payment is made, then Xxxxxx shall repay to the Company, at
the time that the amount of such reduction and Excise Tax is finally determined,
the portion of the prior Excise Tax Gross-up Payment attributable to such
reduction (plus the portion of the Excise Tax Gross-up Payment attributable to
the Excise Tax and the U.S. federal and state income tax imposed on the portion
of the Excise Tax Gross-up Payment being repaid by Xxxxxx as such repayment
results in a reduction in Excise Tax or a United States federal and state income
tax deduction). Notwithstanding the foregoing, if any portion of the Excise Tax
Gross-up Payment to be refunded to the Company has been paid to the United
States federal or state tax authority, then repayment thereof (and related
amounts) shall not be required until actual refund or credit of such portion has
been made to Xxxxxx. Xxxxxx and the Company shall operate in good faith in
determining the course of action to be pursued (and the method of allocating the
expense thereof) if Xxxxxx'x claim for refund or credit is denied. If an
agreement can not be reached between Xxxxxx and the Company, however, the
Company shall have the right to decide the appropriate course of action to
pursue provided that the action does not adversely affect any issues that Xxxxxx
may have with respect to his tax return, other than Excise Tax.
g. In the event the Excise Tax is later determined by
the Accountant or IRS to exceed the amount taken into account hereunder at the
time the Excise Tax Gross-up Payment is made (including by reason of any payment
the existence or amount of which can not be determined at time of the Excise Tax
Gross-up Payment), the Company shall make an additional Excise Tax Gross-up
Payment to or for the benefit of Xxxxxx in respect of such excess (plus any
interest or penalties payable with respect to the such excess) at the time that
the amount of such excess is finally determined.
h. In the event of any controversy with the IRS with
regard to the Excise Tax, Xxxxxx shall permit the Company to control issues
related to the Excise Tax (at its expense), provided such issues do not
potentially materially adversely affect Xxxxxx. In the event issues are
inter-related, then Xxxxxx and the Company shall in good faith cooperate so as
not to jeopardize the resolution of either issue. In the event of any conference
with any taxing authority as to the Excise Tax or associated income taxes,
Xxxxxx shall permit the representative of the
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Company to accompany Xxxxxx and his representative, and Xxxxxx and his
representative shall cooperate with the Company and its representative.
6. Release by Xxxxxx.
a. General Release. In exchange for the payments and
benefits provided in this Agreement, Xxxxxx does hereby release and forever
discharge the "Company Releasees" herein, consisting of the Company, its parent,
subsidiary and affiliate corporations, and each of their respective past and
present parents, subsidiaries, affiliates, associates, owners, members,
stockholders, predecessors, successors, assigns, employees, agents, directors,
officers, partners, representatives, lawyers, and all persons acting by,
through, under, or in concert with them, or any of them, of and from any and all
manner of claims or causes of action, in law or in equity, of any nature
whatsoever, known or unknown, fixed or contingent (hereinafter called "Claims"),
that Xxxxxx now has or may hereafter have against the Company Releasees by
reason of any and all contracts, agreements, acts, omissions, events or facts
occurring or existing prior to the date hereof. The Claims released hereunder
include, without limitation, any alleged breach of the Employment Agreement, the
Stockholder's Agreement dated February 28, 2005 among the Company and the
stockholder party thereto, any express or implied employment agreement; any
alleged torts or other alleged legal restrictions relating to Xxxxxx'x
employment and the termination thereof; and any alleged violation of any
federal, state or local statute or ordinance including, without limitation,
Title VII of the Civil Rights Act of 1964, as amended, 42 USC Section 2000, et
seq.; Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et
seq.; the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq.;
Age Discrimination in Employment Act, as amended, 29 USC Section 621, et seq.;
Civil Rights Act of 1866, and Civil Rights Act of 1991; 42 USC Section 1981, et
seq.; Equal Pay Act, as amended, 29 USC Section 206(d); regulations of the
Office of Federal Contract Compliance, 41 CFR Section 60, et seq.; the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101 et seq.; the
Family and Medical Leave Act, as amended, 29 U.S.C. Section 2601 et seq.; the
Fair Labor Standards Act of 1938, as amended, 29 U.S.C. Section 201 et seq.; the
Employee Retirement Income Security Act, as amended, 29 U.S.C. Section 1001 et
seq.; the Rehabilitation Act of 1973, as amended; the Florida Human Relations
Act; the Florida Civil Rights Act of 1992; any applicable collective bargaining
agreements; and/or any other local, state or federal law, regulation or
ordinance governing or relating to the employment relationship. This release
shall not apply to the Company's obligations hereunder, to any vested
retirement, 401k, pension, stock, stock option, or restricted stock plan
benefits, rights under the Company's Nonqualified Excess Plan effective January
1, 1997, rights under the Company's Deferred Compensation Plan effective July 1,
2005 or to Xxxxxx'x right to indemnification under applicable law and the
Company's articles and bylaws for claims brought against him arising out of his
service as an officer and/or director of the Company and its subsidiaries and
affiliates.
b. Older Worker's Benefit Protection Act.
Xxxxxx agrees and expressly acknowledges that this Agreement
includes a waiver and release of all claims which he has or may have under the
Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Section 621,
et seq. ("ADEA"). The following terms and
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conditions apply to and are part of the waiver and release of the ADEA claims
under this Agreement:
(1) This paragraph and this Agreement are written in a manner
calculated to be understood by him.
(2) The waiver and release of claims under the ADEA contained
in this Agreement does not cover rights or claims that may arise after
the date on which he signs this Agreement.
(3) This Agreement provides for consideration in addition to
anything of value to which he is already entitled.
(4) Xxxxxx has been advised to consult an attorney before
signing this Agreement.
(5) Xxxxxx has been granted twenty-one (21) days after he is
presented with this Agreement to decide whether or not to sign this
Agreement. If he executes this Agreement prior to the expiration of
such period, he does so voluntarily and after having had the
opportunity to consult with an attorney, and hereby waives the
remainder of the twenty-one (21) day period.
(6) Xxxxxx has the right to revoke this general release within
seven (7) days of signing this Agreement. In the event this general
release is revoked, this Agreement will be null and void in its
entirety.
If he wishes to revoke this agreement, Xxxxxx shall deliver
written notice stating his intent to revoke this Agreement to the Chairman of
the Compensation Committee of the Board of Directors of the Company on or before
5:00 p.m. on the seventh (7th) day after the date on which he signs this
Agreement.
c. No Assignment. Xxxxxx represents and warrants to
the Company Releasees that there has been no assignment or other transfer of any
interest in any Claim that Xxxxxx may have against the Company Releasees, or any
of them. Xxxxxx agrees to indemnify and hold harmless the Company Releasees from
any liability, claims, demands, damages, costs, expenses and attorneys' fees
incurred as a result of any person asserting such assignment or transfer of any
right or claims under any such assignment or transfer from Xxxxxx.
d. No Actions. Xxxxxx represents and warrants that he
is not presently aware of any injury for which he may be eligible for workers'
compensation benefits. Xxxxxx agrees that if Xxxxxx hereafter commences, joins
in, or in any manner seeks relief through any suit arising out of, based upon,
or relating to any of the Claims released hereunder or in any manner asserts
against the Company Releasees any of the Claims released hereunder, then Xxxxxx
will pay to the Company Releasees against whom
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such claim(s) is asserted, in addition to any other damages caused thereby, all
attorneys' fees incurred by such Company Releasees in defending or otherwise
responding to said suit or Claim. Provided, however, that Xxxxxx shall not be
obligated to pay the Company Releasees' attorneys' fees to the extent such fees
are attributable to claims under the Age Discrimination in Employment Act or a
challenge to the validity of the release of claims under the Age Discrimination
in Employment Act. Notwithstanding the foregoing, Xxxxxx does not limit, waive
or release any (and specifically reserves) all rights and remedies, in law and
in equity, to enforce the terms of this Agreement.
7. No Admission. Xxxxxx and the Company further understand and
agree that neither the payment of money nor the execution of this Release shall
constitute or be construed as an admission of any liability whatsoever by Xxxxxx
or the Company Releasees.
8. Severability. The provisions of this Agreement are
severable, and if any part of this Agreement is found to be unenforceable, the
other paragraphs (or portions thereof) shall remain fully valid and enforceable.
9. Confidentiality. The terms of this Agreement are to be kept
confidential by Xxxxxx. The Company would not enter into this Agreement but for
Xxxxxx'x promise to maintain the confidentiality of the terms of and existence
of this Agreement. Notwithstanding the foregoing, nothing shall prevent or
restrict Xxxxxx from disclosing the terms of this Agreement to (i) immediate
family and/or professionals who advise Xxxxxx with respect to financial or legal
matters after Xxxxxx has obtained such persons' agreement to respect the
confidentiality provisions herein, (ii) local, state or federal tax authorities,
and/or (iii) as required by applicable law. The Parties acknowledge, however,
that the Company is required to disclose this Agreement by law and/or rule or
regulation of the SEC and/or NASDAQ and, as such, the Agreement will not, in
fact, be kept confidential despite Xxxxxx'x compliance with the terms of this
Section.
10. No Encouragement of Actions Against the Company Releasees.
Xxxxxx agrees that except to the extent required by law, Xxxxxx will not assist
any person in bringing or pursuing legal action against the Company or any
Company Releasees, based on events occurring prior to the Date of this
Agreement. Notwithstanding the foregoing, Xxxxxx does not limit, waive or
release any (and specifically reserves) all rights and remedies, in law and in
equity, to enforce the terms of this Agreement.
11. No Disparagement/Professional Conduct. Xxxxxx further
agrees, as a condition to receipt of the Separation Benefits not to disparage
the Company, its products or any Company Releasees. Company further agrees, as a
condition to Xxxxxx'x execution of this Agreement, not to disparage Xxxxxx.
12. Protection of Confidential Information and Property.
x. Xxxxxx acknowledges that, except for information
that from time to time has been properly disclosed by the Company in public
filings and announcements and commercial dealings, the Company has or may have a
legitimate
11
need for and/or interest in protecting the confidentiality of all information
and data pertaining to the business and affairs of the Company and its
subsidiaries, including without limitation information and data relating to (i)
manufacturing operations and costs, (ii) distribution and servicing methods and
costs, (iii) merchandising techniques, (iv) sales and promotional methods, (v)
customer, vendor and personnel relationships and arrangements, (vi) research and
development projects, (vii) information and data processing technologies, and
(viii) strategic and tactical plans and initiatives (all such information and
data, other than that which has been properly disclosed as aforesaid, being
hereinafter referred to as "Confidential Information").
x. Xxxxxx acknowledges that, in the course of his
employment and consultancy, (i) he has participated and/or will participate in
the development of Confidential Information, (ii) he has been and/or will be
involved in the use and application of Confidential Information for corporate
purposes, and (iii) he otherwise has been and/or will be given access to and
entrusted with Confidential Information for corporate purposes.
x. Xxxxxx agrees that, during the Term, he shall
possess and use the Confidential Information solely and exclusively to protect
and advance the interests of the Company and the Company's controlled
subsidiaries; and that at all times thereafter, he (i) shall continue to treat
the Confidential Information as proprietary to the Company, and (ii) shall not
make use of, or divulge to any third party, all or, any part of the Confidential
Information unless and except to the extent so authorized in writing by the
Company or required by judicial, legislative or regulatory process. Confidential
Information may not be used in connection with the joint venture described in
Section 3(e)(i), unless the use of the specific Confidential Information is
authorized in writing by the Company.
x. Xxxxxx acknowledges that during his employment he
created and/or was furnished with, and during the Term, he will create and/or be
furnished with (i) materials that embody or contain Confidential Information (in
written and electronic form) and (ii) other tangible items that are the property
of the Company and its subsidiaries. Xxxxxx agrees that, upon expiration, or
other termination of the Term, or sooner if the Company so requests, he shall
promptly deliver to the Company all such materials and other tangible items so
created and/or furnished, including without limitation drawings, blueprints,
sketches, manuals, letters, notes, notebooks, reports, lists of customers and
vendors, personnel lists, computer disks and printouts, computer hardware and
printers, and that he shall not retain any originals or copies of such
materials, or any of such tangible items, unless and except to the extent so
authorized in writing by the Company.
x. Xxxxxx agrees to inform all prospective employers
and consulting clients of the content of this Section 12 and of Section 13 of
this Agreement prior to his acceptance of employment and consulting engagements.
12
13. Restrictions against Competition and Solicitation.
x. Xxxxxx agrees that, during the Restricted Period
(defined in Section 13(b)(1) below), he shall not in any way, directly or
indirectly, manage, operate, control, accept employment or a consulting position
with or otherwise advise or assist or be connected with, or own or have any
financial interest in, any Competitive Enterprise (defined in Section 13(b)(2)
below).
b. For purposes of this Section 13:
(1) "Restricted Period" means three (3)
years from the Date of this Agreement;
(2) "Competitive Enterprise" means any
person or business organization engaged, directly or indirectly, in the business
of (i) designing, manufacturing and marketing front-end fixtures, shelving and
other display equipment and accessories for use by retail stores; (ii)
designing, manufacturing and marketing custom wood fixtures, furnishings and
millwork for use by commercial enterprises, (iii) distribution, fulfillment,
marketing, promotion, licensing, in-store merchandising or planogram development
of magazines, books, pre-recorded music, video and video games (in any current
or future developed format or means of delivery, including without limitation,
electronic, online, CDs or DVDs) or any rights regarding any of the foregoing,
(iv) rendering third party billing and collection services with respect to
claims for manufacturer rebates and incentive payments payable to retailers
respecting the sale of magazines, periodicals, and confections, and/or (v)
providing sales and marketing data and analyses to retailers and vendors of
products distributed by the Company.
Notwithstanding the foregoing, "Competitive Enterprise" shall
not include management services provided by Xxxxxx to the potential joint
venture referred to in Section 3(e)(1) and Schedule 1 to this Agreement;
provided, however, that this exception to the definition of "Competitive
Enterprise" shall only be effective (x) if such joint venture is established
with the advanced written approval of the Company's Board of Directors, (y) if
the services to be provided by Xxxxxx are specifically approved in advance, in
writing by the Company's Board of Directors and (z) if, during the Restricted
Period, the Company owns at least 50% of the voting securities of such joint
venture.
c. Without limitation of the Company's rights and
remedies under this Agreement or as otherwise provided by law or in equity, it
is understood and agreed between the parties that the right of Xxxxxx to receive
any future payments otherwise due under this Agreement shall be suspended and
canceled if and for so long as he is in violation of the foregoing covenant not
to compete, except the Company shall remain obligated to pay the $900,000.00
annual bonus as set forth in Section 1, the $4,600,000 severance payment as set
forth in Section 2, any unreimbursed automobile expenses incurred during the
Term as set forth in Section 2, any Earned but Unpaid Monthly Fee as set forth
in Section 3(d), any Earned but Unpaid Joint Venture Bonus as set forth in
Section 3(e)(1), any Earned but Unpaid Magazine Bonus as set forth in Section
3(e)(2), any Earned but Unpaid Music Bonus as set forth in Section 3(e)(3),
13
reimbursement for healthcare insurance paid by Xxxxxx during the Term as set
forth in Section 3(g), any un-reimbursed expenses incurred during the Term as
set forth in Section 3(h), and and any Earned but Unpaid payment under Section
5.5.
x. Xxxxxx agrees further that, during the Restricted
Period, he will not, directly or indirectly, either for himself or on behalf of
any other person or entity, employ or attempt to employ or solicit the
employment or services of any person who is at that time, or has been within six
(6) months immediately prior thereto, employed by the Company or any subsidiary
of the Company.
14. Injunctive Relief and Costs.
x. Xxxxxx acknowledges that any violation of the
provisions of Sections 12 and 13 of this Agreement may cause substantial and
irreparable harm to the Company and its subsidiaries (and their constituencies),
and that the nature and magnitude of the harm may be difficult or impossible to
measure precisely or to compensate adequately with monetary damages.
x. Xxxxxx agrees that the Company shall have the
right to enforce his performance of and compliance with any and all provisions
of Sections 12 and 13 by seeking a restraining order and/or an order of specific
performance and/or other injunctive relief against Xxxxxx from a Florida court
of competent jurisdiction, at any time or from time to time, if it appears that
Xxxxxx has violated or is about to violate any such provision.
c. The provisions of this Section 14 are in addition
to, and not in lieu of, any other rights and remedies that may be available to
the Company for breach of any portion of this Agreement.
15. Company Property. Xxxxxx agrees to search his home and all
other storage areas for all property, including without limitation, any
documents or equipment, owned by Company, and to return it to the Company on or
before November 30, 2006; provided, however, that Xxxxxx may retain his company
computer (along with appropriate IT support) and other such property as is
necessary for his performance of consulting services until the earlier of the
end of the Term or such time as such property is not required to perform his
consulting services.
16. Restrictions on Transfers of Securities. Employee
covenants and agrees that during the Lock-Up Period he and his controlled
affiliates shall not effect any Disposition with respect to any shares of
capital stock or any other securities of the Company (either now held or
hereafter acquired), subject to the following exceptions for Dispositions: (1)
to any person or group approved in writing in advance by a majority of the
Board; (2) to AEC Associates, L.L.C. ("AEC") or any of its affiliates; or (3) in
response to a tender offer or exchange offer made by the Company or recommended
by the Board, or pursuant to a merger, consolidation or other business
combination involving the Company approved by the Board. The "Lock-Up Period"
shall mean the period beginning the Date of this Agreement and ending
14
on the earlier of the third anniversary of the Date of this Agreement or the
date neither AEC nor any of its affiliates own or hold any shares of capital
stock or any other securities of the Company. Employee and his affiliates shall
be deemed to have effected a "Disposition" of any shares of capital stock or
other security, if any of them directly or indirectly, (i) offers to sell,
contracts to sell, makes any short sale of, or otherwise sells, disposes of,
distributes, loans, gifts, pledges, assigns, encumbers or grants any options or
rights with respect to, such stock or security or any interest therein or any
security convertible into or exchangeable or exercisable for any such stock or
security, (ii) enters into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of such stock
or security, or (iii) enters into any agreement or understanding with respect to
the foregoing. Notwithstanding the above, an exercise of employee stock options,
including but not limited to exercise of Option Number 104 ("Option No. 104")
granted on March 16, 1999, with respect to 125,000 shares of Company stock,
Option Number 795 ("Option No. 795") granted on July 12, 2001, with respect to
120,000 shares of Company stock, Option Number 952 ("Option No. 952") granted on
February 1, 2003, with respect to 150,000 shares of Company stock and Option
Number 1NQ ("Option No. 1NQ") granted on February 2, 1998, with respect to
360,000 shares of Company stock, that does not involve a sale of any stock or
securities, except to the extent that options are exercised in a cashless
exercise transaction in which shares are used to pay the exercise price and
applicable withholding taxes, shall not be deemed a Disposition. Employee
consents to any certificate or certificates representing Company stock or
securities subject to this Section 16 and any stock or securities issued in
respect thereof as a result of any stock split, stock dividend,
recapitalization, or similar transaction being stamped or otherwise imprinted
with any legend the Company deems necessary or appropriate to indicate the
restrictions, obligations and limitations imposed by this Section 16.
Notwithstanding the foregoing, nothing in this Section shall
restrict any Disposition with respect to any shares of capital stock or any
other securities of the Company in the event of Xxxxxx'x disability as defined
in Section 3(a) above or in the event of Xxxxxx'x death. Further, nothing in
this Section shall restrict any Disposition to Xxxxxx'x grandchildren pursuant
to the Uniform Gifts to Minors Act, provided, however, that the Company may
condition any Disposition of any shares of capital stock or any other securities
of the Company upon their agreement that they will comply with the provisions of
the first paragraph of this Section 16.
17. Amendment of Options. The Company acknowledges that the
Board of Directors approved the following matters at a meeting held on November
10, 2006, with respect to Option No. 104, Option No. 795, Option No. 952 and
Option No. 1NQ: (a) the amendment of Option Xx. 000, Xxxxxx Xx. 000 and Option
No. 952 to extend the date on which such Options will expire as a result of the
termination of Xxxxxx'x employment to the date which is 3 1/2 months following
the Termination Date and (b) the amendment of Option No. 1NQ to clarify that the
termination of Xxxxxx'x employment and the engagement of Xxxxxx as a consultant
pursuant to this Agreement does not result in "the cessation of employment or
engagement of the Optionee by the Company" as such language is used in the stock
option agreement relating to Option No. 1NQ. The amendments are set forth on
Schedule 4.
15
18. Choice of Law. The Parties acknowledge and agree that this
Agreement shall be interpreted in accordance with Florida law without regard to
conflict of laws principles. All disputes arising under or relating to this
Agreement or the breach of this Agreement shall be brought exclusively in the
federal or state courts of Florida, only if such disputes are not subject to
arbitration under Section 23 of this Agreement.
19. Compliance With Company Policies. Xxxxxx acknowledges that
he has received and read and understands the intent and purposes of the
Company's Code of Business Conduct and Ethics. Xxxxxx shall comply with all
lawful rules and policies of the Company, as in effect from time to time.
20. Successors and Assigns. This Agreement shall be binding
upon, and shall inure to the benefit of, Xxxxxx and the Company and their
respective heirs, legal representatives, successors and assigns.
21. Effect of Business Combination Transactions. In the event
of the merger or consolidation of the Company with any unrelated corporation or
corporations, or of the sale by the Company of a major portion of its assets or
of its business and good will, to an unrelated third party, this Agreement shall
remain in effect and be assigned and transferred to the Company's successor in
interest as an asset of the Company, and the Company shall cause such assignee
to assume the Company's obligations hereunder.
22. Sole and Entire Agreement. This Agreement (including the
schedules hereto) represents the sole and entire agreement among the Parties and
supersedes all prior agreements (including the Employment Agreement),
negotiations, and discussions between the Parties hereto and/or their respective
counsel. Any agreement amending or superseding this Agreement must be in
writing, signed by duly authorized representatives of the Parties, specifically
reference this Agreement; and state the intent of the Parties to amend or
supersede this Agreement.
23. Arbitration. Except as provided in Section 14 regarding
the Company's right to seek an injunction, the Parties hereby agree to submit
any claim or dispute arising out of or relating to the terms of this Agreement,
as to Xxxxxx'x employment, or as to the termination of Xxxxxx'x employment to
private and confidential arbitration by a single neutral arbitrator. Subject to
the terms of this Section, the arbitration proceedings shall be governed by the
rules of AAA applicable to employment disputes as they may be in effect from
time to time, and shall take place in Miami, Florida. The arbitrator shall be
appointed by agreement of the Parties hereto or, if no agreement can be reached,
by AAA pursuant to its rules. The decision of the arbitrator shall be rendered
in writing and be final and binding on all Parties to this Agreement, and
judgment thereon may be entered in any court having jurisdiction. The
arbitrator's fees and/or any other fees payable to AAA shall be shared in
accordance with the rules of AAA. The Parties shall each bear their own
attorneys' fees, witness expenses, expert fees and other costs, except to the
extent they may be awarded otherwise by the arbitrator in accordance with
applicable law. This arbitration procedure is intended to be the sole and
exclusive method of resolving any claim
16
between the Parties, and each of the Parties hereby waives any right to a jury
trial with respect to such claims.
24. Headings. The headings in this Agreement are provided
solely for the Parties' convenience, and are not intended to be part of, nor to
affect or alter the interpretation or meaning of this Agreement.
25. Construction of Agreement. Both Parties have been
represented by, or had the opportunity to be represented by counsel in
connection with this Agreement. Any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
26. Counterparts. For the convenience of the Parties hereto,
this Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
Date: November 12, 2006
--------------------
SOURCE INTERLINK COMPANIES, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------
Its: Interim Co-CEO
------------------------------
XXXXXX
Date: November 12, 2006 /s/ S. Xxxxxx Xxxxxx
-------------------- --------------------------------------
S. Xxxxxx Xxxxxx
17
