EXHIBIT 10.7
DAIRY MART CONVENIENCE STORES, INC.
ROBERT B. STEIN, JR.
GREGORY G. LANDRY
C/O DAIRY MART CONVENIENCE STORES, INC.
ONE VISION DRIVE
ENFIELD, CONNECTICUT 06082
DECEMBER 1, 1995
Mr. Mitchell J. Kupperman
c/o First Merchants Group, Inc.
Devonshire Place, Suite 106
48 Holy Family Road
Holyoke, MA
Re: Termination of Employment, Separation and Related Matters
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Dear Mitch:
This letter agreement, effective as of October 30, 1995, sets forth the
terms and conditions pursuant to which, among other things, (i) you (hereinafter
sometimes referred to as "Kupperman") shall terminate your employment and
directorship with Dairy Mart Convenience Stores, Inc., a Delaware corporation
(the "Company"), (ii) the Company shall compensate you in connection with the
termination of your employment with the Company, (iii) the parties hereto will
settle potential claims between them for certain consideration, (iv) you will
agree not to compete with the Company for certain consideration, (v) the Company
will pay you certain amounts for past services rendered, and (vi) you, on the
one hand, and the Company, Robert B. Stein, Jr. ("Stein") and Gregory G. Landry
("Landry"), on the other hand, shall grant mutual releases. Intending to be
legally bound, the parties hereby agree as follows:
1. Termination. At the closing (the "Closing") of the transactions
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contemplated under that certain Agreement, dated as of October 30, 1995, among
the Company, Charles Nirenberg, FCN Properties Corporation and The Nirenberg
Foundation, Inc., as amended and modified by that certain Modification
Agreement, dated of even date herewith, by and among the Company, Charles
Nirenberg, FCN Properties Corporation and The Nirenberg Foundation, Inc. (said
Agreement, as amended and modified by said Modification Agreement, being
referred to herein as the "Nirenberg Settlement Agreement"), Kupperman shall
deliver to the Company his written resignation from his positions as an officer,
employee and director of the Company
Mr. Mitchell J. Kupperman
December 1, 1995
Page 2
and its subsidiaries (the "Kupperman Resignation"). Kupperman's resignation as
an officer, employee and director of the Company and its subsidiaries shall
become effective immediately upon delivery of the Kupperman Resignation to the
Company at the Closing, without any further act being required by either the
Company or Kupperman. For purposes of this Agreement, the effective date of the
termination of Kupperman's employment with the Company is hereinafter referred
to as the "Termination Date."
2. Consideration.
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For and in consideration of (i) Kupperman's agreement to terminate his
employment with the Company, (ii) the release by Kupperman of certain claims
against the Company, (iii) Kupperman's agreement not to compete with the
Company, and (iv) past services rendered by Kupperman to the Company, the
Company shall make the payments provided for or referred to in Section 3 below
and shall deliver or otherwise make available to Kupperman the benefits or other
consideration referred to in Sections 4 and 5 below.
3. Payments.
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3.1 Amount and Timing of Payments. The Company shall make the
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following payments to Kupperman:
(i) At the Closing, the Company shall make a cash severance
payment to Kupperman of $433,000.
(ii) Prior to the execution and delivery by Kupperman of this
letter agreement, the Company has made the cash payment to Kupperman provided
for in Section 11.
(iii) At the Closing, the Company shall make the additional
cash payments to Kupperman required pursuant to Sections 8(e) and 10 hereof.
3.2 Payment Mechanics. All payments that the Company is required to
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make pursuant to Section 3.1 above shall be made by certified check or by wire
transfer thereof in immediately available funds to an account designated by
Kupperman.
Mr. Mitchell J. Kupperman
December 1, 1995
Page 3
4. Stock Options.
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4.1 Grant of Class A Stock Option. At the Closing, the Company shall
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issue to Kupperman a stock option (the "Class A Stock Option") exercisable for
10,000 shares (the "Class A Option Shares") of Class A Common Stock of the
Company, at an exercise price of $2.875. The Class A Stock Option shall be fully
vested and be immediately exercisable for all of the Class A Option Shares and
shall be exercisable for a period of 18 months from the Termination Date. At
the Closing, the Company and Kupperman shall execute and deliver a stock option
agreement, in form and substance similar to the form customarily used by the
Company for such purposes, evidencing the issuance of the Class A Stock Option
and the terms hereof.
4.2 Payment in Respect of Class B Stock Option. At the Closing, the
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Company shall pay Kupperman $15,000 in respect of its determination not to issue
to Kupperman any option in replacement of Kupperman's previously outstanding
stock option (the "Class B Stock Option") exercisable for 3,750 shares (the
"Class B Option Shares") of Class B Common Stock of the Company. Such payment
pursuant to this Section 4.2 shall be made, at the Closing, by certified check
or by wire transfer thereof in immediately available funds to an account
designated by Kupperman.
4.3 Agreement Concerning Option Profits Agreement. The parties
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hereby acknowledge that Kupperman, Stein and Landry are parties to that certain
Agreement Regarding Obligation to Pay Amount of Option Profits, dated March 12,
1992, by and among HNB Investment Corp. ("HNB"), Frank Colaccino, Kupperman,
Stein and Landry (the "Option Profits Agreement"). Each of the Company, Stein
and Landry hereby agrees that, in the event that (i) Landry or Stein effects an
amendment or modification to, or in any way supersedes in whole or in part, his
obligations under the Option Profits Agreement so as to decrease, release,
terminate or otherwise eliminate such obligations, or (ii) Landry or Stein
reaches any kind of agreement with HNB that improves his position under the
Option Profits Agreement in any way, then (a) concurrently with any such
decrease, reduction, termination or other elimination of the obligations of
Landry or Stein, the obligations of Kupperman under the Option Profits Agreement
shall be decreased, reduced, terminated or otherwise eliminated to the same
extent as the obligations of Landry or Stein, as the case may be, and/or (b)
concurrently with any such improvement in the position of Landry or Stein, the
position of Kupperman under the Option Profits Agreement shall be improved to
the same extent as
Mr. Mitchell J. Kupperman
December 1, 1995
Page 4
the position of Landry or Stein is improved. Each of the Company, Stein and/or
Landry, as the case may be, shall notify Kupperman promptly of the commencement
of any discussions with HNB in connection with the taking, or any proposal to
take, any of the actions described above in this Section 4.3.
5. Additional Benefits
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5.1. Benefits. In addition to the payments contemplated under
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Section 3 hereof and the stock option benefits contemplated under Section 4
hereof, Kupperman shall be entitled to the following benefits in connection with
the termination of his employment with the Company:
(i) At the Closing, the Company shall at its sole cost and
expense transfer unrestricted ownership and legal title, free and clear of any
liens or other encumbrances (including, without limitation, payment or
reimbursement by the Company of any sales or other similar taxes due and owing
as a result of such transfer), to the automobile made available by the Company
for Kupperman's use as of the date hereof.
(ii) From the Termination Date through the earlier of two years
thereafter or the date on which Kupperman and his dependents become eligible for
substantially equivalent coverage provided by a subsequent employer, the Company
shall provide Kupperman and his eligible dependents with continued coverage
under all health, medical, dental and hospitalization plans maintained by the
Company during such time period on the same terms and conditions applicable to
executive officers of the Company.
(iii) On the Termination Date, all options to purchase stock or
other rights to purchase or own stock (including grants of stock) held by
Kupperman that are not vested shall immediately vest and become exercisable in
full (without any further action by the Company or Kupperman being required
therefor) and all options to purchase stock and other rights to purchase or own
stock (including grants of stock) then held by Kupperman shall remain in effect
and be exercisable until the last business day of the 18th month following the
Termination Date.
(iv) At the Closing, the Company will assign and transfer to
Kupperman, or his designee, all of the Company's right, title and interest in
the life insurance policies covering Kupperman's life that were held by the
Company as of the Termination Date. From and after the Closing, Kupperman shall,
at
Mr. Mitchell J. Kupperman
December 1, 1995
Page 5
his election, assume and pay any and all premiums and other costs associated
with the continuation of such policies. The Company shall execute and deliver
any and all appropriate instruments necessary to evidence the foregoing
assignment and transfer as promptly as practicable after the Closing.
(v) From and after the Termination Date, Kupperman shall continue
his participation in, and shall retain all of his rights (including, without
limitation, his right to receive benefits and his right to make elections or
other decisions or determinations) under, all of the other employee benefit
plans, practices and policies of the Company (the "Other Employee Benefit
Arrangements") to the extent that such plans, practices and policies as in
effect on the date hereof contemplate or provide, by their own respective terms,
that (i) participating employees may continue their participation thereunder
after the termination of their employment with the Company or (ii) participating
employees may or shall receive benefits thereunder after such termination.
Notwithstanding any term of the Other Employee Benefit Arrangements to the
contrary, on the Termination Date Kupperman shall become vested on all benefits,
if any, to which he would otherwise be entitled under the Other Employee Benefit
Arrangements. The determination of the amount of benefits, if any, to which
Kupperman is entitled under the Other Employee Benefit Arrangements shall be
made as of either the date hereof or the Termination Date, whichever results in
the highest benefit to Kupperman.
5.2. Mitigation. Subject to the provisions of Section 5.1(ii)
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hereof, Kupperman shall not be required to mitigate any of the benefits provided
in this letter agreement by seeking other employment or otherwise, nor shall the
amount of any payment or benefit provided for in this letter agreement be
reduced by any compensation or benefit earned by Kupperman as the result of
employment by another employer after the Termination Date or otherwise.
6. Expenses and Taxes. The parties hereto agree that (i) all attorney,
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accounting and other consultant fees incurred by each of the parties in
connection with the negotiation and signing of the Agreement and (ii) all
federal and state tax liabilities of each party relating to this Agreement and
the transactions comtemplated hereby shall be the responsibility of such party,
except for any tax liabilities of Kupperman pursuant to Section 5.1(i) which
shall be the responsibility of the Company.
Mr. Mitchell J. Kupperman
December 1, 1995
Page 6
7. Condition Precedent. It shall be a condition precedent to the
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obligation of each of Kupperman and the Company to consummate the transactions
contemplated under this letter agreement that the Closing, and all of the
transactions to be performed at the Closing under the Nirenberg Settlement
Agreement, shall have been consummated.
8. Releases. Provided the Closing occurs:
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(a) Kupperman, on behalf of himself and his affiliates, hereby agrees
to waive all claims against the Company, its subsidiaries and their respective
former, current and future officers, directors, employees, stockholders, agents,
attorneys, and other representatives (collectively, "Affiliates") and hereby
releases and discharges the Company and its Affiliates from any all actions,
causes of action, suits, debts, sums of money, accounts, covenants, contracts,
controversies, agreements, promises, judgments, demands, liability, claims and
damages whatsoever, in law or equity, that Kupperman and/or his affiliates ever
had, now has, or hereafter can, shall or may have, for, upon or by reason of his
former employment with, service as a director of, or direct or indirect holding
of equity securities in, the Company, including, without limitation, any claims
arising under any federal, state or local law or ordinance, tort, employment
contract (express or implied), public policy, or any other obligation,
including, without limitation, any claims arising under Title VII of the Civil
Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as
amended, and all claims for wrongful discharge, workers' compensation, wages,
monetary or equitable relief, vacation, disability, other employee fringe
benefits, benefit plans, medical plans, or attorneys' fees; provided, however,
that notwithstanding the foregoing, Kupperman reserves and shall not be deemed
to have released (i) any rights he may have pursuant to the Company's 401(k) and
profit sharing plans, (ii) any rights he may have pursuant to the Company's
Other Employee Benefit Arrangements, (iii) his ability to seek and obtain
indemnification by the Company pursuant this Agreement and the Company's
Restated Certificate of Incorporation and Amended and Restated By-laws, each as
in effect on the date hereof, (iv) all claims relating to the performance of the
Company's obligations under this Agreement, and (v) his ability to assert claims
for contribution or other appropriate relief against the Company or one or more
of its Affiliates in any action in which he is a defendant commenced by any
third party, including but not limited to one or more stockholders of the
Company seeking to act on behalf of the Company.
Mr. Mitchell J. Kupperman
December 1, 1995
Page 7
(b) Kupperman hereby agrees to waive all claims against each of Stein
and Landry in their capacity as direct or indirect general partners of DM
Associates Limited Partnership ("DM Associates"), New DM Management Associates I
("New DM Management I"), New DM Management Associates II ("New DM Management
II"), and any attorneys of the foregoing and hereby releases and discharges them
from any and all actions, causes of action, suits, debts, dues, sums of money,
accounts, covenants, contracts, controversies, agreements, promises, judgments,
demands, liability, claims and damages whatsoever, in law or equity, that
Kupperman ever had, now has, or hereafter can, shall or may have, for, upon or
by reason of any event or thing whatsoever occurring on or prior to the
Termination Date and relating to his interests in DM Associates, New DM
Management I and New DM Management II; provided, however, that notwithstanding
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the foregoing, Kupperman reserves and shall not be deemed to have released any
rights he may have to seek and obtain indemnification and/or contribution or
other appropriate relief from DM Associates, New DM Management I or New DM
Management II or any of the partners of such partnerships pursuant to such
partnerships' respective partnership agreements as in effect on the date hereof
or pursuant to applicable law.
(c) The Company hereby agrees to waive all claims against Kupperman
and his affiliates and their respective former, current and future officers,
directors, employees, stockholders, agents, attorneys and other representatives
and hereby releases and discharges Kupperman, his affiliates and such other
persons from any and all actions causes of action, suits, debts, dues, sums of
money, accounts, covenants, contracts, controversies, agreements promises,
judgments, demands, liability, claims and damages whatsoever, in law or equity,
that the Company ever had, now has, or hereafter can, shall or may have for,
upon or by reason of Kupperman's former employment with, service as an officer
and director of, direct or indirect holding of equity securities in, or in any
other capacity relating to the Company (including as direct or indirect general
partner of DM Associates, New DM Management I and New DM Management II,
including any claims in connection with the transactions relating to the
dissolution of DM Management Associates and DM Associates, the reconstitution of
DM Associates and the replacement of DM Management Associates as the general
partner of DM Associates by New DM Management I and New DM Management II, and
any claims in connection with any action taken by Charles Nirenberg, Kupperman,
New DM Management I and DM Associates to effect a change in the composition of
the Board of Directors of the Company), including, but not limited, to any
claims arising under any federal, state or local law or ordinance,
Mr. Mitchell J. Kupperman
December 1, 1995
Page 8
tort, employment contract (express or implied), public policy, or any other
obligation other than (i) those relating to the performance of Kupperman's
obligations under this Agreement and (ii) subject to Kupperman's reservation of
rights pursuant to Section 8(a) hereof and rights pursuant to Section 9 hereof,
claims made prior to or after the date of this letter agreement by one or more
stockholders of the Company seeking to act on behalf of the Company.
(d) Stein and Landry in their individual capacities and as general
partners of New DM Management I and New DM Management II, each hereby agrees to
waive all claims against Kupperman in his capacity as general partner of New DM
Management I and New DM Management II, and as indirect general partner of DM
Associates, and any attorneys of the foregoing and hereby releases and
discharges them from any and all actions, causes of action, suits, debts, dues,
sums of money, accounts, covenants, contracts controversies, agreements,
promises, judgments, demands, liability, claims and damages whatsoever, in law
or equity, that either or both of them ever had, now has, or hereafter can,
shall or may have, for, upon or by reason of any event or thing whatsoever
occurring on or prior to the Termination Date and relating to Kupperman's
interests in DM Associates, New DM Management I and New DM Management Associates
II, including, without limitation, any claims in connection with the
transactions relating to the dissolution of DM Management Associates and DM
Associates, the reconstitution of DM Associates and the replacement of DM
Management Associates as the general partner of DM Associates by New DM
Management I and New DM Management II and any claims in connection with any
action taken by Charles Nirenberg and Kupperman, for and on behalf of New DM
Management I and DM Associates, to effect a change in the composition of the
Board of Directors of the Company; provided, however, that notwithstanding the
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foregoing, each of Stein and Landry reserves and shall not be deemed to have
released his ability to seek and obtain contribution or other appropriate relief
against Kupperman pursuant to the respective partnership agreements of DM
Associates, New DM Management I or New DM Management II, each as in effect on
the date hereof, or pursuant to applicable law. Consistent with the foregoing,
Stein and Landry each hereby agrees that he will not vote or take action,
individually or with respect to his general partner interests in New DM
Management I or New DM Management II to assert, or to cause New DM Management I
or New DM Management II or DM Associates to assert, any claims against Kupperman
in the capacities specified and with respect to the matters released in this
Section 8(d).
Mr. Mitchell J. Kupperman
December 1, 1995
Page 9
(e) The parties hereby acknowledge and agree that, without limiting
the generality of Section 8(a) above, among the claims being released by
Kupperman pursuant to said Section 8(a) are claims that Kupperman may have
against the Company (which the Company does not hereby acknowledge) for pain and
suffering and damage to reputation suffered by Kupperman as a result of the
termination of Kupperman's employment with the Company and his position as
Executive Vice President. The parties hereby further acknowledge and agree that,
in consideration of Kupperman's agreement to release the Company from any such
claims for pain and suffering and damage to reputation, the Company shall pay to
Kupperman at the Closing a non-refundable sum of $348,000 by wire transfer of
federal funds to an account or accounts designated by Kupperman.
9. Indemnification. Provided the Closing occurs, the Company agrees to
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the fullest extent permitted under Delaware law to indemnify and hold Kupperman
harmless from and against any costs, expenses (including, without limitation,
reasonable legal fees and expenses), judgments, fines, penalties and amounts
paid in settlement (collectively, "Costs") which he may incur or to which he may
become subject by reason of (i) the transactions contemplated hereby, except for
those relating to any expenses or taxes set forth in Section 6 hereof, (ii) his
service as director, officer and/or employee of the Company (to the fullest
extent permitted under Section 145 of the Delaware General Corporation Law),
including, without limitation, Costs in connection with the Kahn litigation and
(iii) the transactions relating to the dissolution of DM Management Associates
and DM Associates, the reconstitution of DM Associates and the replacement of DM
Management Associates as general partner of DM Associates by New DM Management I
and New DM Management II and any action taken by Charles Nirenberg, Kupperman
and/or any of the foregoing entities to effect a change in the composition of
the Board of Directors of the Company. Upon its receipt of any notice from
Kupperman with respect to any matter for which indemnification is available, the
Company shall have the right to assume the defense thereof with counsel of its
choice and thereafter the Company shall not be responsible for any legal fees
incurred by Kupperman in respect thereof; provided, that if Kupperman is advised
by counsel that there may be defenses available to him that differ from those
available to the Company or other indemnified parties or otherwise that the
potential exists for a conflict between Kupperman and the Company and/or such
other indemnified persons, then Kupperman shall be entitled to retain one firm
of legal counsel on his behalf at the Company's expense. Kupperman shall not
compromise or settle any
Mr. Mitchell J. Kupperman
December 1, 1995
Page 10
action for which indemnification may be available without the Company's prior
written consent, which shall not be unreasonably withheld. Such indemnification
shall be conditional on Kupperman reasonably cooperating with the Company with
respect to any matter for which indemnification is available. Kupperman's rights
to obtain indemnification from the Company under this Section 9 shall be in
addition to, and not in lieu of, any right that Kupperman may have to obtain
indemnification from the Company under the Company's Restated Certificate of
Incorporation and Amended and Restated By-laws, each as in effect on the date
hereof, under any other agreement entered into by Kupperman with the Company, or
under any other applicable provision of law.
10. Non-Competition; Non-Solicitation; Consultation. Provided that the
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Closing occurs, in consideration of the payment referred to in Section 10(d)
below: (a) Kupperman agrees and covenants that for the period of time commencing
on the date of the Closing and ending on the third anniversary of such date (the
"Non-Compete Period") he will not, directly or indirectly: (i) for his own
account or as an employee, officer, director, partner, joint venturer,
shareholder, investor, consultant or otherwise (except as an investor in a
corporation whose stock is publicly traded and in which Kupperman holds less
than 5% of the outstanding voting shares), engage in the business of owning,
managing or operating convenience stores in Massachusetts, Connecticut, Hudson
Valley in New York State, Rhode Island, Ohio, Southern and Middle Michigan,
Kentucky, Southern Indiana, Western Pennsylvania, Tennessee or North Carolina
(the "Covered Areas"), such geographical areas constituting places in which the
Company conducts business as of the date hereof; (ii) solicit the employment of
any current employee of the Company or any employee who first enters the employ
of the Company during such period; provided, that such prohibition shall not
apply to any employee who has left the employ of the Company; (iii) induce or
encourage any current employee of the Company or any employee who first enters
the employ of the Company during such period to leave the employ of the Company;
or (iv) interfere in a material manner with any material business relationship
in any Covered Area between the Company and any third party, including any
shareholder or any creditor of the Company.
(b) The Company and Kupperman acknowledge and agree that the
provisions of Section 10(a) hereof are reasonable because the scope thereof
encompasses only the business of the Company as conducted on the date hereof and
they are limited to the locations in which the Company does business as of the
date hereof.
Mr. Mitchell J. Kupperman
December 1, 1995
Page 11
(c) Notwithstanding anything contained in this Section 10 to the
contrary, if the period of time or the geographical areas specified in Section
10(a) hereof is determined to be unreasonable in any proceeding before any court
or agency legally empowered to enforce the provisions of this Section 10, then
the period of time and area of the restriction shall be reduced so that this
Agreement may be enforced in such area and during such period of time as shall
be determined to be reasonable; provided, however, that such reduction shall not
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extend to any period of time or jurisdiction where such reduction is unnecessary
to make the period of time or the geographical area specified in Section 10(a)
enforceable therein.
(d) As compensation for the matters referred to in this Section 10,
the Company shall pay to Kupperman at the Closing a non-refundable sum of
$240,000 by wire transfer of federal funds to an account designated by
Kupperman.
11. Special Bonus. In conformity with the Special Bonus paid to Messrs.
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Stein and Landry pursuant to Section 6 of each of their employment agreements
with the Company, both dated September 14, 1995, the Company has paid a Special
Bonus to Kupperman for the six month financial period ended July 29, 1995 of
$131,500.
12. Deductions and Withholding. Kupperman agrees that the Company shall
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withhold from any and all payments required to be made to Kupperman pursuant to
this letter agreement, all federal, state, local and/or other taxes which the
Company determines are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect.
13. Miscellaneous. This letter agreement supersedes in its entirety all
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previous employment, severance or other agreements between the parties hereto
relating to the subject matter set forth herein, and shall be governed by the
internal substantive laws of the Commonwealth of Massachusetts and shall inure
to the benefit of, and be binding upon, the heirs, personal representatives,
executors, administrators, successors and permitted assigns of the parties
hereto. This letter agreement shall be enforceable by Kupperman's person or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Kupperman should die while any amount or
benefit would still be payable or available to Kupperman under this letter
agreement if Kupperman had continued to live, any such amount or benefit shall
be paid or made available in accordance with the terms of this letter agreement
to Kupperman's devisees, legatees or
Mr. Mitchell J. Kupperman
December 1, 1995
Page 12
other designees or, if there is no such designee, to Kupperman's estate. The
Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
letter agreement in the same manner and to the same extent as required of the
Company. The rights and obligations of any party under this letter agreement may
only be assigned with the prior written consent of each of the other parties
hereto. This letter agreement may only be modified or amended pursuant to a
written instrument signed by all of the parties hereto.
If the foregoing accurately reflects our understanding, please so
acknowledge by countersigning this letter agreement in the space provided for
your signature below, whereupon this letter agreement shall become our legally
binding agreement.
Very truly yours,
/s/ Robert B. Stein, Jr.
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Robert B. Stein, Jr.
/s/ Gregory G. Landry
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Gregory G. Landry
DAIRY MART CONVENIENCE
STORES, INC.
By: /s/ Robert B. Stein, Jr.
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Title: President
Accepted and Agreed to as of
this 1st day of December, 1995:
/s/ Mitchell J. Kupperman
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Mitchell J. Kupperman