Exhibit 10.1
SEPARATION AGREEMENT
This Separation Agreement (the "Agreement") is made and
entered into by and between Innovo Group Inc. ("Innovo") and
Xxxxxx X. Xxxxxx, Xx. ("Executive") (collectively, the
"Parties"), to be effective as of January 20, 2006 ("Termination
Date").
RECITALS
A. WHEREAS, as of the effective date of this Agreement, Innovo
employs Executive pursuant to an at-will employment relationship.
B. WHEREAS, Innovo and Executive acknowledged the termination
of the services of Executive's employment with Innovo, and its
subsidiaries,pursuant to the at-will employment arrangement (the
"Employment Relationship") and in connection therewith, Innovo
has agreed to extend to Executive certain payments of severance
benefits and continuation of benefits.
C. WHEREAS, in connection with the payment of these benefits,
each agrees to release the other, in accordance with the terms
and provisions herein, from any and all obligations, liabilities
and claims arising from or in any way related to the employment
arrangement, the termination thereof or otherwise.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Parties hereto acknowledge, agree and covenant as follows:
AGREEMENT
1. Termination. The Parties hereto agree that Innovo has
terminated the services of Executive from his position as Chief
Executive Officer and that the Employment Relationship shall be
deemed terminated as of the effective date of this Agreement.
This Agreement is made with the mutual and express intent of the
Parties to extinguish all obligations and liabilities imposed on
either of them by the Employment Relationship or otherwise,
except as specifically set forth herein. Innovo agrees that it
will not oppose any claim for unemployment benefits that
Executive may file with any governmental agency as a result of
the termination of the Employment Relationship pursuant to this
Agreement.
2. Severance Benefits. In return for Executive's execution
of and adherence to this Agreement, including the releases that
form a material part of this Agreement, Innovo shall provide
Employee with certain benefits, including benefits to which he
would not otherwise be entitled:
(a) Salary Continuation. Innovo shall pay
Executive his aggregate regular salary in effect as of his
Termination Date, in the amount of One Hundred Thousand Dollars
($100,000.00) in four equal installments for a total amount of
Four Hundred Thousand Dollars ($400,000.00) to be paid on
February 3, 2006, March 3, 2006, March 31, 2006 and April 28,
2006, all of which are Innovo's regular paydays, and shall be
subject to usual and customary deductions required by law and
Innovo policy. In the event of Executive's death before the
completion of all payments, any remaining payments due under this
paragraph shall be paid to Executive's estate.
(b) Group Health Plan. Executive shall be entitled to
elect for himself "continuation coverage" as provided under
Section 4980B of the Internal Revenue Code of 1986, as amended
("COBRA"). In the event Executive becomes re-employed and
eligible for such new employer's group health insurance coverage,
then this benefit shall cease. To the extent that Executive
elects and is eligible for continuation coverage under COBRA,
Innovo will reimburse him, or alternatively, pay, for the cost of
such continuation coverage for himself during the twelve (12)
months following the Termination Date (the "Benefit Continuation
Period"). Such reimbursements shall be treated as additional
salary continuation and shall be subject to usual and customary
deductions required by law and Company policy. After the Benefit
Continuation Period, Executive shall bear the full cost of such
continuation coverage, if available.
(c) Life and Disability Insurance. Subject to
any limitations imposed by applicable laws or by the underwriters
of any group or individual life or disability insurance policies
maintained by Innovo, Innovo shall continue its coverage of
Executive under such group or individual life and disability
insurance policies through the Benefit Continuation Period. In
the event Executive becomes re-employed and eligible for such new
employer's group or individual life or disability insurance
coverage, then this benefit shall cease. If Innovo is unable to
continue such coverage and if such benefit is not otherwise
terminated by re-employment, Innovo shall pay to Executive an
amount sufficient on an after-tax basis to obtain such coverage
through the end of the Benefit Continuation Period. Such
benefits or payments shall be treated as additional salary
continuation and shall be subject to usual and customary
deductions required by law and Innovo policy.
(d) Stock Options. Effective on September 3, 2004
and June 13, 2005, Innovo granted to Executive certain stock
options as evidenced by those certain Innovo Group Inc. Stock
Option Agreements executed by Innovo and Executive (the "Option
Agreements"). As of the Termination Date, Executive had a vested
right to exercise options to purchase certain shares of Innovo's
common stock. Executive and Innovo agree that each paragraph
3.1(d) of the Option Agreements is hereby amended to delete such
section in its entirety. Accordingly, Executive and Innovo agree
and acknowledge that Executive shall have the vested right under
the Options Agreements, as so amended, to exercise options to
purchase up to 500,000 shares of Innovo's common stock in
accordance with and subject to the terms and provisions of the
Option Agreements.
3. Release of Claims. Each Party hereto,on behalf of himself
or itself and his or its successors, assigns and affiliates,
hereby fully and forever releases, remises, waives and discharges
the other Party hereto and its successors, assigns, affiliates,
heirs and beneficiaries from any and all, obligations,
liabilities and claims whatsoever (whether known or unknown,
foreseen or unforeseen) relating to or arising in any way out of
the Employment Relationship, the termination thereof or
otherwise, including, without limitation any obligations,
liabilities or claims against Executive arising out of or related
to any actual or alleged acts or omissions of Executive or based
upon the fact that Executive is or was a trustee, director or
officer of Innovo or any affiliate of Innovo or is or was serving
at the request of Innovo or any affiliate as a trustee, director,
officer, member, employee or agent of another corporation or a
partnership, joint venture, trust or other enterprise, including,
without limitation, service with respect to employee benefit
plans, whether or not the basis of such obligation, liability or
claim is alleged action in an official capacity as a trustee,
director, officer, member, employee or agent while serving as a
trustee, director, officer, member, employee or agent. Executive
specifically acknowledges that he is releasing all such claims
including, without limitation, all statutory claims arising under
Title VII of the Civil Rights Act of 1964 ("Title VII"), the
Americans with Disabilities Act ("ADA"), the Fair Labor Standards
Act ("FLSA") and any similar federal, state or local statutes or
regulations.
4.Indemnification. Innovo agrees that if Executive is made a
party or is threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"), by reason of the fact that
Executive is or was a trustee, director or officer of Innovo or
any affiliate of Innovo or is or was serving at the request of
Innovo or any affiliate as a trustee, director, officer, member,
employee or agent of another corporation or a partnership, joint
venture, trust or other enterprise, including, without
limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in
an official capacity as a trustee, director, officer, member,
employee or agent while serving as a trustee, director, officer,
member, employee or agent, Executive shall be indemnified to the
fullest extent allowed by applicable law against all liabilities,
losses and expenses incurred or suffered by Executive in
connection therewith. Innovo will cooperate with Executive with
respect to the defense of any Proceeding, including making
documents, witnesses and other reasonable information related to
the defense available to Executive and Executive's counsel
pursuant to joint-defense agreements or confidentiality
agreements, as appropriate. Innovo agrees to file any potential
counterclaims or cross claims that Innovo may possess which are
related to such Proceeding, and will take all reasonable action
to pursue such counterclaims and cross claims, as Executive may
reasonably direct. If Innovo refuses to file or fully pursue any
such counterclaim or cross claim, in the reasonable opinion of
Executive, Executive will be deemed to be appointed as the
attorney-in-fact for Innovo for the purpose of filing and
pursuing such claims on behalf of Innovo.
5. Directors' and Officers' Insurance. Innovo will maintain
directors' and officers' insurance with a policy limit of no less
than $3 million that will cover Executive against claims made
against Executive in any Proceeding or threatened Proceeding for
a minimum of two years after the execution of this Separation
Agreement.
6. Non-Disparagement.Each Party acknowledges and agrees that
such Party will not defame or publicly criticize the services,
business, integrity, veracity or personal or professional
reputation of the other Party in either a professional or
personal manner at any time following the execution of this
Separation Agreement.
7. Cooperation. Executive hereby agrees to cooperate with
Innovo regarding Executive's execution of any necessary and
appropriate required documentation evidencing said separation as
set forth pursuant to this Agreement.
8. No Amendment. This Agreement may not be rescinded,
amended or modified,except by a written agreement executed by both
Parties.
9. Severability. If any provision of this Agreement is held
by any court of competent jurisdiction to be invalid, illegal or
unenforceable, such provision shall be deemed modified in such
manner as to render such provision valid, legal and enforceable
to the fullest extent permitted by law in such jurisdiction. The
remaining provisions of this Agreement shall not be affected
thereby, and shall continue in full force and effect.
10. Successors. This Agreement shall be binding upon the
Parties and their respective successors and assigns, and shall
inure to the benefit of their respective successors and assigns.
11. Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State
of California, without reference to the conflict-of-laws or
choice-of-law principles thereof. The parties agree that any
dispute between the parties, including but not limited to any
action or proceeding that may arise under this Agreement shall be
brought in and maintained in a court of competent jurisdiction in
Los Angeles County, California.
12. Confidentiality. In consideration for the promises set
forth herein, each Party agrees that such Party will not
disclose, disseminate and/or publicize any of the terms of this
Agreement, directly or indirectly, specifically or generally, to
any person, corporation, association or governmental agency,
except (i) to such Party's tax return preparer and taxing
agencies, (ii) as required by law, and (iii) in response to an
order of a court or governmental agency of competent jurisdiction
or subpoena issued under proper authority.
13. No Other Benefits. Executive acknowledges that, except as
set forth herein, he is not entitled to any compensation, monies
or benefits from Innovo, including but not limited to compensation
for accrued vacation, bonuses,commissions, expenses or other forms
of compensation or benefits. Executive hereby waives all rights to
any payments other than for outstanding bonafide business expenses
incurred by Executive on behalf of Innovo prior to January 20,
2006.
14. Entire Agreement. This Agreement represents and contains
the entire agreement and understanding between Executiveand Innovo
with respect to its subject matter, and it supersedes any and all
prior oral and written agreements and understandings, and no
representation, warranty, condition,understanding, or agreement of
any kind with respect to the subject matter of this Agreement will
be relied upon by Executive unless specifically incorporated in
this Agreement; provided, however,that the Option Agreements, will
each remain in fullforce and effect,except to the extent expressly
modified or amended hereunder. Further, this Agreement is intended
to be a binding contract between the parties and shall not be
modified, except by writing signed by both parties.
15. Tax Withholdings.Certain payments made under this Agreement
may be subject to required income and other tax withholdings.
Executive will be responsible for any taxes which may be due as a
result of any payments made by Innovo or benefits otherwise
provided as described above, and Executive agrees to indemnify and
hold Innovo harmless from any claim and expense that Innovo may
incur as a resultof any failure by Executive to pay any such taxes.
* * * *
IN WITNESS WHEREOF, the Parties hereto have each reviewed,
understood, approved and executed this Agreement as of the date
opposite their respective signatures.
EXECUTIVE:
Signed: /s/ Xxxxxx X. Xxxxxx, Xx. Dated: January 27, 2006
Xxxxxx X. Xxxxxx, Xx.
INNOVO GROUP INC.:
Signed: /s/ Xxxx Xxxxxxxx Dated: January 27, 2006
Xxxx Xxxxxxxx
Authorized Representative of
Innovo Group, Inc.
