EXHIBIT 10.33
SEPARATION AGREEMENT AND RELEASE
This Separation Agreement and Release is between MARK W. DUFFEY, a
resident of Harris County, Texas (the "Employee"), and CARRIAGE SERVICES, INC.,
a Delaware corporation (the "Company").
The Employee and the Company agree as follows:
1. The Employee's full-time employment with the Company and/or one or more
of its subsidiaries (the Company, together with its subsidiaries, being
hereafter collectively referred to as "Carriage") will terminate effective as of
December 31, 2000 (the "Transition Date") by the voluntary resignation of the
Employee. The Employee shall be entitled to receive all base compensation,
benefits and accrued vacation through the Transition Date.
2. Simultaneously with the parties' execution of this Agreement, the
Employee shall tender his resignation, effective as of the Transition Date, as a
member of the Board of Directors and as President of, together with any and all
other positions he may hold with, the Company. He shall also tender his
resignation as director and officer of or any other capacity with all other
Carriage entities of which he may serve in any such capacity. Notwithstanding
the foregoing, the Employee shall not resign as officer or director of Carriage
Life Events, Inc., a Delaware corporation ("Carriage Life Events"), which the
Employee acknowledges is 100% owned by the Company and as to which the Employee
shall have no contractual rights except for those specifically mentioned herein
and in the exhibits attached hereto.
3. This Agreement and the exhibits hereto collectively supersede and
extinguish the Executive Employment Agreement between the parties dated November
8, 1999 ("Prior Employment Agreement"), as well as any other employment
agreement and/or bonus or incentive compensation plan or arrangement, if any,
entered into between the Employee and Carriage. Employee shall cease to be
eligible to participate in any of Carriage's employee benefit plans as of the
Transition Date except as otherwise expressly provided in this Agreement or the
exhibits hereto. Without limiting the generality of the foregoing, the Employee
shall thereupon cease to be eligible to participate in the Carriage Services
401(k) Plan, but (i) the Company shall direct the plan administrator to cause
the Employee to be 100% vested in such Plan, if he is not already, and (ii) the
Company shall coordinate with the Employee and the plan administrator to permit
the Employee to roll-over his benefits in such plan to a new plan or individual
retirement account of the Employee's choice, as provided by applicable law.
4. Simultaneously with the execution and delivery of this Agreement, the
Company and the Employee have executed and delivered to one another (i) a
Consulting Agreement of even date herewith, substantially in the form of Exhibit
A hereto, which shall become effective as of January 1, 2001, respecting the
Employee's continued status with the Company as a consultant on an independent
contractor basis (the "Consulting Agreement"), and (ii) a Exclusive Development
Agreement of even date herewith, substantially in the form of Exhibit B hereto,
which shall become effective as of January 1, 2001, respecting Employee's
participation in the E-Commerce Venture (as hereafter defined) (the "Exclusive
Development Agreement"). The parties understand that the Consulting Agreement
and the Exclusive Development Agreement shall not become binding until this
Agreement has become final and binding on the parties and the Company shall have
received the Non-Revocation Statement referred to in Section 16 below, and in
the event that the Employee revokes this Agreement pursuant to Section 16
hereof, the Consulting Agreement and the Exclusive Development Agreement shall
each thereupon become void ab initio as if never entered into.
5. In lieu of any performance bonus for the year 2000, the Company shall
pay the Employee a bonus under the circumstances described in this Section 5 (in
addition to any bonus that might be earned in accordance with the Consulting
Agreement). If (but only if) the E-Commerce Venture (as hereafter defined)
receives on or before June 30, 2001 a Cash Equity Infusion (as hereafter
defined) of at least $10,000,000, then the Company shall either (i) assign to
the Employee an amount equal to ten percent (10%) of the Company's equity
ownership interest in the E- Commerce Venture, after giving effect to the
transactions which have resulted in the Cash Equity Infusion triggering the
bonus payment under this Section 5, or (ii) pay to the Employee an amount in
cash, less applicable withholdings, equal to the value of such 10% of the
Company's equity ownership interest. Such election shall be at the Company's
sole and absolute discretion. If payment is made pursuant to clause (i) above,
the Employee shall either pay the amount of his withholding obligation
associated therewith in cash to the Company, or else the Company shall withhold
an appropriate portion of such equity interest sufficient to pay for such
withholding obligation. In determining the value of the Company's equity
ownership interest in the E-Commerce Venture for purposes of clause (ii) above,
the same valuations shall be used as applied in the Cash Equity Infusion, with
appropriate consideration given to any preferential rights or other differences
between the new investors and the Company. The parties acknowledge that the
Company is currently the 100% owner of the E-Commerce Venture, and it is
understood that the terms and conditions under which the Company will agree to
any transaction involving a Cash Equity Infusion, including any dilution which
the Company will suffer as a result thereof, will be at the Company's sole and
absolute discretion, and the Company will have no liability or responsibility to
the Employee if the Company declines to permit such a transaction to occur. For
purposes of this Agreement:
"E-Commerce Venture" means one or more business ventures, in
whatever form (whether corporation, limited liability company, general or
limited partnership, joint venture, business trust or otherwise), in which
the Company or its affiliates or their successors and assigns has a
financial interest, if such venture is primarily engaged in acting as a
portal, or distribution channel, primarily (but not exclusively) through
electronic means (such as via the Internet), for consumers to plan,
finance and/or fulfill major life events and celebrations, which may
include but will not necessarily be limited to death care and
memorialization. An E-Commerce Venture specifically excludes a business or
firm that is engaged in the traditional delivery of funeral or cemetery
services. The parties acknowledge that the Company has heretofore engaged
Electronic Data Systems Corporation to provide certain services toward the
development of such a venture, in connection with which certain
intellectual property rights have been created (including but not limited
to certain confidential business plans), all of which are the exclusive
property of the Company, and any
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business venture which arises from such intellectual property rights and
concepts is specifically intended to be encompassed with the definition of
"E-Commerce Venture." In addition, the parties acknowledge that Carriage
Life Events has been formed for the specific purpose of developing such
rights and concepts and that it constitutes an E-Commerce Venture for
purposes hereof. On the other hand, neither Lifetime Reflections nor
Legacy Management Partners shall be deemed E-Commerce Ventures. The
parties acknowledge that the idea or concept of rating businesses or firms
(other than in the death care industry) according to quality or other
criteria is not intellectual property of Carriage for purposes hereof.
"Cash Equity Infusion" means funds provided by one or more investors
in exchange for the issuance to such investors of equity interests in the
E-Commerce Venture. Such funds shall constitute part of the Cash Equity
Infusion if they are advanced for, or in connection with, the E-Commerce
Venture's issuance of common stock, convertible preferred stock, or
options or warrants convertible or exercisable into such common or
convertible preferred stock. By way of example only, Cash Equity Infusion
will include funds advanced through subordinated notes issued in
conjunction with warrants to purchase common stock. The amount of the Cash
Equity Infusion shall include the net cash proceeds actually received by
the E-Commerce Venture, after deducting all commissions, fees and expenses
(including legal and accounting fees) associated with the transaction in
which the Cash Equity Infusion is made. The term "Cash Equity Infusion"
specifically excludes services rendered or to be rendered in exchange for
an equity interest in the E-Commerce Venture.
6. Provided the Employee does not revoke this Agreement as provided in
Section 16 hereof, the Company shall pay the Employee the payments hereafter
described in paragraphs (a) and (b) of this Section 6, less applicable
withholdings, grant the Employee the options described in paragraph (c) of this
Section 6, and provide to the Employee and his eligible dependents the benefits
described in paragraph (d) of this Section 6 (collectively, the "Severance
Payments"). Payment and provision of the Severance Payments, as well as all
other obligations of the Company described in this Agreement and the exhibits
hereto, shall in all respects be subject to the Company's receipt from the
Employee of a properly completed and signed Non-Revocation Statement in the form
attached as Exhibit C hereto (the "Non-Revocation Statement"). The parties
understand that the Company's obligations to pay and provide the Severance
Payments, and the effectiveness of all of the other agreements of the parties
described herein, shall not become effective until the Company's receipt of the
properly completed and signed Non-Revocation Statement, and in the event that
the Employee revokes this Agreement pursuant to Section 16 hereof, all such
agreements shall thereupon become void ab initio as if never entered into.
(a) The Company shall pay the Employee the sum of $783,500, in
installments ("Fixed Severance Payments"), as hereafter provided in this
paragraph (a).
(i) The first installment shall be in the amount of $200,000
and shall be due on or before three business days following the
Company's receipt of the Non- Revocation Statement.
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(ii) The next six installments shall be payable monthly, each
in the amount of $15,666.67, and shall be due on or before the last
day of January through June 2001.
(iii) The final thirty (30) installments shall also be payable
monthly, each in the amount of $16,316.67, and shall be due on or
before the last day of July 2001 through December 2003.
(iv) Notwithstanding the foregoing, if while any Fixed
Severance Payments remain due and payable by the Company, the
Employee sells all or any portion of the equity ownership interests
owned by him or his affiliates in the E- Commerce Venture (as
defined in Section 5 above), then the Net Sale Proceeds (as
hereafter defined) from such transaction shall be deducted from all
Fixed Severance Payments which become due after the date on
consummation of such sale. For purposes of the foregoing, an
affiliate of the Employee includes (i) the Employee's spouse and
minor children, (ii) any trust (whether revocable or irrevocable) in
which a majority in interest of the beneficiaries include one or
more of the Employee, his spouse and his minor children, (iii) any
corporation, general or limited partnership or other business entity
that either (A) is controlled by the Employee or (B) a majority of
the voting securities of which are owned directly or indirectly by
the Employee, his spouse or his minor children, or (iv) any executor
or custodian for the estate or person of the Employee. "Net Sale
Proceeds" means the amount of all consideration received in the
transaction, including the amount of all cash or cash equivalents,
face amount of notes or deferred consideration, market value of
marketable securities and fair market value of any other property
received, and includes consideration allocated to no-compete
covenants but excludes any amount allocated for bona fide services
rendered or to be rendered.
(v) The Company, at its option and in its sole discretion, may
elect at any time to prepay all or any portion of any remaining
Fixed Severance Payments due under this Section 6(a). In such event,
such remaining Fixed Severance Payments shall be discounted to
present value based upon a discount rate of eight percent (8%) per
annum, compounded monthly. To exercise such option, the Company
shall provide written notice to such effect to the Employee,
together with tender of payment of the amount prepaid as discounted
in accordance herewith.
(b) In addition to Fixed Severance Payments, the Company shall pay
the Employee the amount, if any, by which Employee's Earned Income (as
hereafter defined) in any of the three calendar years commencing January
1, 2001 and ending December 31, 2003 ("Transition Years") is less than
$150,000. The amounts payable by the Company under this paragraph (b)
("Stop-Gap Payments") shall initially be payable on a monthly basis,
subject to reconciliation at the conclusion of each Transition Year. Such
monthly Stop-Gap Payments shall be paid by the Company on or before the
tenth day following the end of each month, with the first payment due by
February 10, 2001. Initially, each monthly Stop-Gap payment shall be in
the amount of $12,500. If Employee has any Earned Income in any
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month, he shall so notify the Company at least five business days prior to
the date fixed for payment (provided that, in the absence of bad faith,
Employee's failure to timely so notify the Company shall not constitute a
breach of this Agreement), and the monthly Stop-Gap Payment for that month
will be reduced by the amount of such Earned Income. By no later than
April 15 of the year after each Transition Year, Employee will furnish the
Company with a true and correct copy of his federal income tax return for
such Transition Year, and specifically including all Forms W-2, 1099 and
other written documents relating to Earned Income received by Employee
during such Transition Year. The Company will have the right to review the
information furnished by Employee and conduct a reasonable inspection of
his records, but only to the extent reasonably necessary to verify the
amount of Earned Income received during the Transition Year. To the extent
that the sum of Employee's Earned Income for the Transition Year plus the
cumulative monthly Stop-Gap Payments paid in such Transition Year exceeds
$150,000, Employee shall immediately pay to the Company the amount of the
difference, up to (but not exceeding) the amount of such cumulative
monthly Stop-Gap Payments. If such difference is not immediately paid, the
Company shall be entitled to offset such difference against Fixed
Severance Payments and Stop-Gap Payments under this paragraph (b). To the
extent the sum of such Earned Income plus such cumulative monthly Stop-Gap
Payments in a Transition Year is less than $150,000, the Company shall
immediately pay the amount of the difference to the Employee.
Notwithstanding the foregoing, if Employee's Earned Income in any
Transition Year exceeds $150,000, then the amount of the excess shall be
carried forward and included in Earned Income for subsequent Transition
Years, it being the intention of the parties that the Company's maximum
obligation hereunder over the three Transition Years shall not exceed
$450,000 less the amount of Employee's total Earned Income over those
three Transition Years. Payments under this paragraph (b) shall not be
subject to offset for Net Sale Proceeds as described in paragraph (a)
above. For purposes hereof, "Earned Income" includes the gross amount
(before deduction for applicable withholdings) of all base compensation
and bonuses (whether or not discretionary) for services rendered by the
Employee, including salary and consulting fees, compensation for
no-compete payments, and director's fees, from any and all sources
(including but not limited to the E-Commerce Venture). Earned Income
includes property received as compensation for services, but specifically
excludes incentive stock options, non-statutory stock options and stock
appreciation rights issued at a strike price equal to fair market value of
the underlying security, and participation in employee stock purchase and
other employee benefit plans. Consulting Fees for "Required Services"
under the Consulting Agreement are excluded from Earned Income. The
Company's obligation to make Fixed Severance Payments under paragraph (a)
above shall survive Employee's death, but its obligation to pay Stop-Gap
Payments under this paragraph (b) shall terminate upon Employee's death
(subject to reconciliation through the date of death in accordance with
the above provisions).
(c) Effective as of December 29, 2000, while the Employee shall
still be considered an employee of the Company, the Company shall cause to
be issued to the Employee non-qualified options under the Company's 1995
Stock Incentive Plan to purchase up to 50,000 shares of the Company's
Class A Common Stock, $.01 par value, at an exercise price of $2-7/8 per
share, expiring ten years from the date of grant, and vesting 25% per year
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during the first four years of the term of the options, all subject to the
terms and conditions of such Plan and the Nonqualified Stock Option
Agreement to be issued thereunder evidencing such options. There shall be
no conditions to the vesting of such options other than the passage of
time, subject to termination of unvested options upon the Employee's death
and the limited survival of vested options for exercise by his estate in
the manner provided in such Plan; provided, however, that all unvested
options shall become fully vested upon the occurrence of a "Change in
Control" (as defined in such Plan).
(d) For a period beginning January 1, 2001 and (subject to the
remainder of this paragraph (d)) ending December 31, 2004, the Company
shall cause the Employee and his eligible dependents to be included in
Carriage's group medical benefits plan from time to time in effect and
extended to Carriage's employees (or another plan providing substantially
the same benefits), on substantially the same terms and conditions
extended by Carriage to executive employees of the Company, until such
time (if prior to December 31, 2004) that the Employee becomes eligible to
participate in any other similar plan which might become available to the
Employee and his dependents.
(e) The Company's obligation to pay the Severance Payments is
subject to Employee's compliance with his covenants in this Agreement and
with the absence of a discharge for Cause pursuant to the Consulting
Agreement. In the event of a discharge for Cause under the Consulting
Agreement, or Employee's material breach of this Agreement and his failure
to cure such breach (if the same is capable of being cured) within 30 days
after the Company's written notice of such breach, then the Company shall
be entitled to suspend payment of Severance Payments and to offset its
damages arising from any breach by Employee of this Agreement or the
Consulting Agreement against such Severance Payments.
7. In consideration for the Severance Payments, and for the further
consideration of the other commitments made by the Company herein and in the
exhibits hereto, the Employee hereby discharges and releases Carriage and
Carriage's stockholders, directors, officers, employees, agents, successors and
assigns (collectively, "Released Parties") from any claim, demand, and/or cause
of action whatsoever, whether vicarious, derivative, or direct, presently known
or unknown, whether sounding in contract, tort or otherwise, under common law or
by statute or regulation, that is based upon facts arising prior to the date
hereof with respect to any matter or action related to the Employee's employment
with, termination from, and/or affiliation with Carriage, or in connection with
any statements made or actions taken in connection with such employment
relationship or its termination, including, but not limited to, any claims under
the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1964
(Title VII), as amended, the Civil Rights Act of 1991, the Pregnancy
Discrimination Act, the Family and Medical Leave Act of 1993, the Fair Labor
Standards Act, the Employee Retirement Security Act of 1974, the Americans With
Disabilities Act of 1990, the Fair Labor Standards Act, the Fair Credit
Reporting Act, the Worker Adjustment and Retraining Notification Act of 1988,
the Texas Commission on Human Rights Act, the Texas Wage Payment Statute or the
Texas Labor Code, all as amended and in effect on the date hereof, and all
claims based on the existence of any contract; breach of any duty or covenant of
good faith and fair dealing; slander; defamation; invasion of privacy;
detrimental reliance; intentional or negligent infliction of emotional distress;
duress; promissory estoppel; negligent misrepresentation; intentional
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misrepresentation or fraud; assault; battery; conspiracy; negligent hiring,
retention, or supervision; any alleged act of harassment or intimidation or any
other claim arising under employment-related statutes, laws, rules and
regulations; provided that the Employee does not release Carriage from its
obligations hereunder or in the exhibits hereto.
8. In consideration for the releases and other commitments made by the
Employee herein and in the exhibits hereto, the Company, for itself and on
behalf of all Carriage entities, hereby discharges and releases the Employee and
his heirs and assigns from any claim, demand, and/or cause of action whatsoever,
whether vicarious, derivative, or direct, presently known or unknown, whether
sounding in contract, tort or otherwise, under common law or by statute or
regulation, that is based upon facts arising prior to the date hereof with
respect to any matter or action related to the Employee's employment with,
termination from, and/or affiliation with Carriage, or in connection with any
statements made or actions taken in connection with such employment relationship
or its termination; provided that the Company does not release the Employee from
its obligations hereunder or in the exhibits hereto.
9. This Agreement is not a suggestion of or an admission of any wrongdoing
or liability on the part of any party. The Employee does not waive any rights or
claims that may arise after the date hereof.
10. The Employee agrees and covenants not to sue or participate in any
suit, charge or proceeding of any kind against Carriage or any of the other
Released Parties, based upon any claim, demand, and/or cause of action
whatsoever, presently known or unknown, that is based upon facts arising prior
to the date hereof with respect to any matter or action related to the
Employee's employment, termination from, and/or affiliation with Carriage, or in
connection with any statements made or actions taken in connection with such
employment relationship or its termination.
11. The parties shall issue, or have issued, a press release in the form
attached as Exhibit D hereto. Provided the Employee does not revoke this
Agreement, the parties agree not to make any public statements regarding the
nature of the Employee's separation from the Company which are inconsistent with
the statements set forth in such press release.
12. This Agreement contains the entire agreement between the Employee and
the Company and cannot be changed, modified, or amended without a written
agreement signed by the Employee and the Company.
13. This Agreement is made and shall be enforced pursuant to the laws of
the State of Texas.
14. Should any part of this Agreement be found to be void, that
determination will not affect the remainder of the Agreement.
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15. The offer made by the Company herein will expire at 12:01 a.m. on the
forty-fifth day following the date of the offer made herein. The Employee may
accept this offer at any time prior to the expiration by signing this Agreement.
16. This Agreement has been entered into voluntarily and not as a result
of coercion, duress, or undue influence, economic or otherwise. The Employee
acknowledges that he has read and fully understands the terms of this Agreement,
has been advised to consult with an attorney before executing this Agreement,
and the Severance Payments constitute recited in Section are in excess of that
to which the Employee might otherwise be entitled to receive from the Company.
The Employee represents that he has been given up to forty-five (45) days to
consider the terms of the separation as described herein. Following the date of
this Agreement, the Employee shall have a period of seven (7) days to revoke
this Agreement by delivering to the Company, at its address shown opposite its
signature below, a written notice revoking this Agreement and specifically
referring to the right to do so under this Section 16. If the Employee desires
not to so revoke, the Employee will deliver the Non-Revocation Notice after
expiration of such seven-day period. Failure to deliver any notice within such
seven-day period shall constitute a lapse of the Employee's right to revoke, but
the Company's obligation to pay and provide the Severance Payments shall
nonetheless remain subject to receipt from the Employee of the signed
Non-Revocation Statement. If the Employee revokes this Agreement as aforesaid,
the Employee shall forfeit all rights hereunder, including any right to receive
the Severance Payments. In addition, in the event of such revocation (i) the
Consulting Agreement and the Exclusive Development Agreement shall be rendered
void ab initio as if never entered into, and (ii) the provisions of the Prior
Employment Agreement (including Paragraph 6 - Restrictive Covenants) shall
thereupon be reinstated.
Address:
____________________________________________
597 Piney Point Road MARK W. DUFFEY
Houston, Texas 77024
____________________________________________
Date
1900 St. James Place - 4th Floor CARRIAGE SERVICES, INC.
Houston, Texas 77056
By:_________________________________________
Melvin C. Payne, Chief Executive Officer
____________________________________________
Date
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Exhibits
A - Consulting Agreement
B - Exclusive Development Agreement
C - Non-Revocation Statement
D - Press Release
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EXHIBIT C
NON-REVOCATION STATEMENT
I, MARK W. DUFFEY, acknowledge that at least seven (7) days has expired
since the execution of the Separation Agreement and Release between me and
Carriage Services, Inc., a Delaware corporation, on the _____ day of
___________, 2000, and I knowingly and voluntarily elect not to revoke this
Separation Agreement and Release.
EXECUTED this ____ day of ______________________, 2000.
____________________________________________
MARK W. DUFFEY