EXHIBIT 10.33
SEVERANCE AGREEMENT
This SEVERANCE AGREEMENT ("Agreement"), effective as of _________,
____, by and between Tandy Brands Accessories, Inc., a Delaware corporation (the
"Company"), and _____________________ (the "Executive"), evidences that;
WHEREAS, the Executive is a senior executive of the Company and has
made and/or is expected to make or continue to make significant contributions to
the profitability, growth and financial strength of the Company;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management in the event of a Change in Control (as defined
hereafter) and desires to establish certain minimum compensation rights with
respect to its key senior executives, including the Executive, applicable in the
event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives are
not practically disabled from discharging their duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter materially the
compensation and benefits which the Executive could reasonably expect to receive
from the Company absent a Change in Control and, accordingly, although effective
and binding as of the date hereof, this Agreement shall become operative only
upon the occurrence of a Change in Control; and
WHEREAS, the Executive is willing to render services to the Company on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of Agreement:
(a) Sections 1 and 8 through 20 of this Agreement shall be
effective and binding as of the Effective Date, but,
anything in this Agreement to the contrary
notwithstanding, Sections 2, 3, 4, 5, 6 and 7 of this
Agreement shall not be effective and binding unless and
until there shall have occurred a Change in Control. For
purposes of this Agreement, a "Change in Control" will
be deemed to have occurred if at any time during the
Term (as hereinafter defined) any of the following
events shall occur:
(i) The Company is merged, consolidated or
reorganized into or with another corporation
or other legal entity, and as a result of
such merger, consolidation or reorganization
less than a majority of the combined voting
power of the then outstanding securities of
the Company or such corporation or other
legal entity immediately after such
transaction are held in the aggregate by the
holders of Voting Stock (as hereinafter
defined) of the Company immediately prior to
such transaction and/or such voting power is
not held by substantially all of such
holders in substantially the same
proportions relative to each other;
(ii) The Company sells (directly or indirectly)
all or substantially all of its assets
(including, without limitation, by means of
the sale of the capital stock or assets of
one or more direct or indirect subsidiaries
of the Company) to any other corporation or
other legal entity, of which less than a
majority of the combined voting power of the
then outstanding voting securities (entitled
to vote generally in the election of
directors or persons performing similar
functions on behalf of such other
corporation or legal entity) of such other
corporation or legal entity are held in the
aggregate by the holders of Voting Stock (as
hereinafter defined) of the Company
immediately prior to such sale and/or such
voting power is not held by substantially
all of such holders in substantially the
same proportions relative to each other;
(iii) Any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act") becomes (subsequent to
the Effective Date) the beneficial owner (as
the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange
Act) of securities representing thirty
percent (30%) or more of the combined voting
power of the then-outstanding securities
entitled to vote generally in the election
of directors of the Company ("Voting
Stock");
(iv) The Company files a report or proxy
statement with the Securities and Exchange
Commission pursuant to the Exchange Act
disclosing in response to Form 8-K, Schedule
14A or Schedule 14C (or any successor
schedule, form or report or item therein)
that a change in control of the Company has
occurred;
(v) If during any one (1) year period,
individuals who at the beginning of any such
period constitute the directors of the
Company cease for any reason to constitute
at least a majority thereof, unless the
election, or the nomination for election by
the Company's stockholders, of each director
of the Company first elected during such
period was approved by a vote of at least
two-thirds (2/3) of (i) the directors of the
Company then still in office who were
directors of the Company at the beginning of
any such period or (ii) directors of the
Company whose nomination and/or election was
approved by the directors referenced in
clause (i) immediately preceding; or
(vi) The stockholders of the Company approve a
plan contemplating the liquidation or
dissolution of the Company.
Notwithstanding the foregoing provisions of Subsection
1(a)(iii) or 1(a)(iv) hereof, a "Change in Control"
shall not be deemed to have
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occurred for purposes of this Agreement solely because
(i) the Company, (ii) a corporation or other legal
entity in which the Company directly or indirectly
beneficially owns 100% of the voting securities of such
entity, or (iii) any employee stock ownership plan or
any other employee benefit plan of the Company or any
wholly-owned subsidiary of the Company, either files or
becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D, Schedule 14D-1,
Form 8-K, Schedule 14A or Schedule 14C (or any successor
schedule, form or report or item therein) under the
Exchange Act, disclosing beneficial ownership by it of
shares of Voting Stock, whether in excess of thirty
percent (30%) or otherwise, or because the Company
reports that a change in control of the Company has
occurred by reason of such beneficial ownership.
(b) Upon occurrence of a Change in Control at any time
during the Term, Sections 2, 3, 4, 5, 6 and 7 of this
Agreement shall become immediately binding and
effective.
(c) The period during which this Agreement shall be in
effect (the "Term") shall commence as of the date hereof
and shall expire as of the later of (i) the close of
business on June 30, ____ or (ii) the expiration of the
Period of Employment (as hereinafter defined); provided,
however, that (A) subject to Section 9 hereof, if, prior
to a Change in Control, the Executive ceases for any
reason to be an employee of the Company, thereupon the
Term shall be deemed to have expired and this Agreement
shall immediately terminate and be of no further effect
and (B) commencing on June 30, ____ and the last day of
each of the Company's fiscal years commencing
thereafter, the Term of this Agreement shall
automatically be extended for an additional year unless,
not later than ninety (90) calendar days prior to such
June 30, the Company or the Executive shall have given
notice that the Company or the Executive, as the case
may be, does not wish to have the Term of this Agreement
extended.
2. Employment; Period of Employment:
(a) Subject to the terms and conditions of this Agreement,
upon the occurrence of a Change in Control, the Company
shall continue the Executive in its employ and the
Executive shall remain in the employ of the Company for
the period set forth in Subsection 2(b) hereof (the
"Period of Employment"), in the position and with
substantially the same duties and responsibilities that
the Executive had immediately prior to the Change in
Control, or to which the Company and the Executive may
hereafter mutually agree in writing. Throughout the
Period of Employment, the Executive shall devote
substantially all of the Executive's time during normal
business hours (subject to vacations, sick leave and
other absences in accordance with the policies of the
Company as in effect for senior executives immediately
prior to the Change in Control) to the business and
affairs of the Company, but nothing in this
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Agreement shall preclude the Executive from devoting
reasonable periods of time during normal business hours
to (i) serving as a director, trustee or member of or
participant in any organization or business so long as
such activity would not constitute Competitive Activity
(as hereinafter defined) if conducted by the Executive
after the Executive's Termination Date (as hereinafter
defined), (ii) engaging in charitable and community
activities, or (iii) managing the Executive's personal
investments.
(b) The Period of Employment shall commence on the date on
which a Change in Control occurs and, subject only to
the provisions of Section 4 hereof, shall continue until
the earlier of (i) the expiration of the third
anniversary of the occurrence of the Change in Control
or (ii) the Executive's death; provided, however, that
commencing on each anniversary of the Change in Control,
the Period of Employment shall automatically be extended
for an additional year unless, not later than 90
calendar days prior to such anniversary date, the
Company or the Executive shall have given notice that
the Company or the Executive, as the case may be, does
not wish to have the Term extended.
3. Compensation During Period of Employment:
(a) During the Period of Employment, the Executive shall
receive (i) annual base salary at a rate not less than
the Executive's annual fixed or base compensation or
such higher rate as may be determined from time to time
by the Board of Directors of the Company (the "Board")
or the compensation committee or similar committee
thereof (the "Committee") (which base salary at such
rate is herein referred to as "Base Pay") and (ii) an
annual amount equal to not less than the highest
aggregate annual bonus, incentive or other payments of
cash compensation paid to the Executive in addition to
the amounts referred to in clause (i) above made or to
be made in or with respect to any calendar year during
the three calendar years immediately preceding the year
in which the Change in Control occurred pursuant to any
bonus, incentive, profit-sharing, performance,
discretionary pay or similar policy, plan, program or
arrangement of the Company ("Incentive Pay") which
contemplates cash payments other than Employee Benefits
(as hereinafter defined); provided, however, that
nothing herein shall preclude a change in the mix
between Base Pay and Incentive Pay so long as the
aggregate cash compensation received by the Executive in
any one calendar year is not reduced in connection
therewith or as a result thereof and, provided further,
however, that in no event shall any increase in the
Executive's aggregate cash compensation or any portion
thereof in any way diminish any other obligation of the
Company under this Agreement. The Executive's Base Pay
shall be payable monthly. The Executive's Incentive Pay
shall be paid annually as soon as reasonably practicable
following determination of the amount payable but in no
event later than the date which is ninety (90)
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days following the last day of the fiscal year during
which such Incentive Pay is deemed earned.
(b) For the Executive's service pursuant to Subsection 2(a)
hereof, during the Period of Employment the Executive
shall, if and on the same basis as the Executive
participated therein immediately prior to the Change in
Control, be a full participant in, and shall be entitled
to the perquisites, benefits and service credit for
benefits as provided under any and all employee
retirement income and welfare benefit policies, plans,
programs or arrangements in which senior executives of
the Company participate generally, including without
limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive
retirement or other retirement income or welfare
benefit, deferred compensation, incentive compensation,
group and/or executive life, accident, health, dental,
medical/hospital or other insurance (whether funded by
actual insurance or self-insured by the Company),
disability, salary continuation, expense reimbursement
and other employee benefit policies, plans, programs or
arrangements that may exist immediately prior to the
Change in Control or any equivalent successor policies,
plans, programs or arrangements that may be adopted
thereafter by the Company (collectively, "Employee
Benefits"); provided, however, that, except as set forth
in Section 5(a)(v) hereof, the Executive's rights
thereunder shall be governed by the terms thereof and
shall not be enlarged hereunder or otherwise affected
hereby. Subject to the proviso in the immediately
preceding sentence, if and to the extent such
perquisites, benefits or service credit for benefits are
not payable or provided under any such policy, plan,
program or arrangement as a result of the amendment or
termination thereof subsequent to a Change in Control,
then the Company shall itself pay or provide such
Employee Benefits. Nothing in this Agreement shall
preclude improvement or enhancement of any such Employee
Benefits, provided that no such improvement shall in any
way diminish any other obligation of the Company under
this Agreement.
(c) The Company has determined that the amounts payable
pursuant to this Section 3 constitute reasonable
compensation. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to the
Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any
additional payments required under this Section 3(c)) (a
"Payment" and collectively, the "Payments") is subject
to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise
Tax"), then the Company shall pay to the Executive an
additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all
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taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
4. Termination Following a Change in Control:
(a) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Company during the Period
of Employment only upon the occurrence of one or more of the
following events:
(i) If the Executive is unable to perform the essential
functions of the Executive's job (with or without
reasonable accommodation) because the Executive has
become permanently disabled within the meaning of,
and actually begins to receive disability benefits
pursuant to, a long-term disability plan maintained
by or on behalf of the Company for senior executives
generally or, if applicable, employees of the Company
immediately prior to the Change in Control; or
(ii) For "Cause," which for purposes of this Agreement
shall mean that, prior to any termination pursuant to
Section 4(b) hereof, the Executive shall have
committed:
(A) an intentional act of fraud, embezzlement or
theft in connection with the Executive's
duties or in the course of the Executive's
employment with the Company;
(B) intentional wrongful damage to property of
the Company;
(C) intentional wrongful disclosure of
confidential information of the Company; or
(D) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been materially harmful to the
Company. For purposes of this Agreement, no act, or failure to
act, on the part of the Executive shall be deemed
"intentional" if it was due primarily to an error in judgment
or negligence, but shall be deemed "intentional" only if done,
or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for "Cause" hereunder unless
and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the Board then in office
at a meeting of the Board called
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and held for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive, together with
the Executive's counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the
Executive has committed an act set forth above in this Section
4(a)(ii) and specifying the particulars thereof in detail.
Nothing herein shall limit the right of the Executive or the
Executive's beneficiaries to contest the validity or propriety
of any such determination.
(b) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Executive during the Period
of Employment with the right to benefits as provided in
Section 5 hereof upon the occurrence of one or more of the
following events:
(i) Any termination by the Company of the employment of
the Executive for any reason other than for Cause or
as a result of the death of the Executive or by
reason of the Executive's disability and the actual
receipt of disability benefits in accordance with
Section 4(a)(i) hereof; or
(ii) Termination by the Executive of the Executive's
employment with the Company during the Period of
Employment upon the occurrence of any of the
following events:
(A) Failure to elect or reelect the Executive to
the office(s) of the Company which the
Executive held immediately prior to a Change
in Control, or failure to elect or reelect
the Executive as a director of the Company
or the removal of the Executive as a
director of the Company (or any successor
thereto), if the Executive shall have been a
director of the Company immediately prior to
the Change in Control;
(B) A significant adverse change in the nature
or scope of the authorities, powers,
functions, responsibilities or duties
attached to the position(s) with the Company
which the Executive held immediately prior
to the Change in Control, a reduction in the
aggregate of the Executive's Base Pay and
Incentive Pay received from the Company, or
the termination of the Executive's rights to
any Employee Benefits to which the Executive
was entitled immediately prior to the Change
in Control or a reduction in scope or value
thereof without the prior written consent of
the Executive, any of which is not remedied
within ten (10) calendar days after receipt
by the Company of written notice from the
Executive of such change, reduction or
termination, as the case may be;
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(C) A determination by the Executive made in good faith
that, following a Change in Control, as a result of a
change in circumstances significantly affecting the
Executive's position(s) held with the Company,
including without limitation, a change in the scope
of the business or other activities for which the
Executive was responsible immediately prior to a
Change in Control, that the Executive has been
rendered substantially unable to carry out, has been
substantially hindered in the performance of, or has
suffered a substantial reduction in any of the
authorities, powers, functions, responsibilities or
duties attached to the position(s) held with the
Company by the Executive immediately prior to the
Change in Control, which situation is not remedied
within ten (10) calendar days after written notice to
the Company from the Executive of such determination;
(D) The liquidation, dissolution, merger, consolidation
or reorganization of the Company or transfer of all
or a significant portion of its business and/or
assets, unless the successor (by liquidation, merger,
consolidation, reorganization or otherwise) to which
all or a significant portion of its business and/or
assets have been transferred (directly or by
operation of law) shall have assumed all duties and
obligations of the Company under this Agreement
pursuant to Section 11 hereof;
(E) The Company shall require that the principal place of
work of the Executive be changed to any location
which is in excess of fifty (50) miles from the
location thereof immediately prior to the Change in
Control or to travel away from the Executive's office
in the course of discharging the Executive's
responsibilities or duties hereunder significantly
more (in terms of either consecutive days or
aggregate days in any calendar year) than was
required of the Executive prior to the Change in
Control without, in either case, the Executive's
prior consent; or
(F) Any material breach of this Agreement by the Company
or any successor thereto.
(c) A termination by the Company pursuant to Section 4(a) hereof or by the
Executive pursuant to Section 4(b) hereof shall not affect any rights
which the Executive may have pursuant to any agreement, policy, plan,
program or arrangement of the Company providing Employee Benefits,
which rights shall be governed by the terms thereof. If this Agreement
or the employment of the Executive is terminated under circumstances in
which
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the Executive is not entitled to any payments under Sections 3 or 5
hereof, the Executive shall have no further obligation or liability to
the Company hereunder with respect to the Executive's prior or any
future employment by the Company.
5. Severance Compensation:
(a) If, following the occurrence of a Change in Control, the
Company shall terminate the Executive's employment during the
Period of Employment other than pursuant to Section 4(a)
hereof, or if the Executive shall terminate the Executive's
employment pursuant to Section 4(b) hereof, the Company shall
pay to the Executive the amount specified in Section 5(a)(i)
hereof within five (5) business days after the date (the
"Termination Date") that the Executive's employment is
terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the
Executive if the termination is pursuant to Section 4(b)
hereof):
(i) In lieu of any further payments to the Executive for
periods subsequent to the Termination Date, but
without affecting the rights of the Executive
referred to in Section 5(b) hereof, a lump sum
payment (the "Severance Payment") in an amount equal
to the present value (using a discount rate required
to be utilized for purposes of computations under
Section 280G of the Code or any successor provision
thereto, or if no such rate is so required to be
used, a rate equal to the then-applicable interest
rate prescribed by the Pension Benefit Guaranty
Corporation for benefit valuations in connection with
non-multiemployer pension plan terminations assuming
the immediate commencement of benefit payments (the
"Discount Rate")) of 200% the sum of (A) the
aggregate Base Pay (at the highest rate in effect
during the Term prior to the Termination Date) plus
(B) the aggregate Incentive Pay (based upon the
greatest amount of Incentive Pay paid or payable to
the Executive for any year during the Term but prior
to the year in which the Termination Date occurs);
provided, however, that if the amount otherwise
payable hereunder is a "parachute payment" (as
determined under Section 280G of the Code or any
successor provision thereto), then in no event will
the "present value" (as determined under Section 280G
of the Code or any successor provision thereto) of
the amount otherwise payable hereunder, when added to
the "present value" (as determined under Section 280G
of the Code or any successor provision thereto) of
any other "parachute payments" (as that term is
defined in Section 280G of the Code or any successor
provision thereto) from the Company, exceed an amount
(the "299% Amount") equal to 299% of the Executive's
"base amount" (as that term is defined in Section
280G of the Code (without regard to Section
280G(b)(2)(A)(ii) thereof)
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or any successor provision thereto) and if the amount
otherwise payable hereunder would exceed the 299%
Amount, the Severance Payment shall be reduced to the
extent necessary so that the aggregate present value
determined in the previous clause does not exceed the
299% Amount.
(ii) The determination of whether any amount otherwise
payable under Section 5(a)(i) is a "parachute
payment" and causes the 299% Amount to be exceeded
shall be made, if requested by the Executive or the
Company, by the Company's public accounting firm (the
"Accounting Firm"). The costs of obtaining such
determination shall be borne by the Company. The fact
that the Severance Payment shall be reduced as a
result of the existence of the limitations contained
in this Section 5(a) shall not limit or otherwise
affect any rights of the Executive to any Employee
Benefit, or other right arising other than pursuant
to this Agreement. Without limiting the generality of
the foregoing, upon the Executive's termination of
employment under the circumstances described in this
Section 5, the Company shall (upon request of the
Executive) pay over to the Executive all vested
benefits to which the Executive is entitled under and
in accordance with the terms of the Company's
employee savings, stock ownership, supplemental
executive retirement and similar plans in the event
such payments are not otherwise made in accordance
with the terms of such plans.
(iii) Except to the extent that the payments or benefits
pursuant to this Section 5(a)(iii) would result in a
reduction of the amount of the Severance Payment
because they would exceed the 299% Amount, (A) for a
period of two (2) years immediately following the
Termination Date the Company shall arrange to provide
the Executive with Employee Benefits substantially
similar to those which the Executive was receiving or
entitled to receive immediately prior to the
Termination Date (and if and to the extent that such
benefits shall not or cannot be paid or provided
under any policy, plan, program or arrangement of the
Company solely due to the fact that the Executive is
no longer an officer or employee of the Company, then
the Company shall itself pay to the Executive and/or
the Executive's dependents and beneficiaries, such
Employee Benefits) and (B) without limiting the
generality of the foregoing, the two (2) year period
referred to above shall be considered service with
the Company for the purpose of service credits under
the Company's retirement income, supplemental
executive retirement and other benefit plans
applicable to the Executive and/or the Executive's
dependents and beneficiaries immediately prior to the
Termination Date. Without otherwise limiting the
purposes or effect of Section 6 hereof, Employee
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Benefits payable to the Executive pursuant to this
Section 5(a)(iii) by reason of any "welfare benefit
plan" of the Company (as the term "welfare benefit
plan" is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended)
shall be reduced to the extent comparable welfare
benefits are actually received by the Executive from
another employer during such period following the
Executive's Termination Date until the expiration of
the two (2) year period referred to above.
(iv) Notwithstanding any provision of this Section 5(a) to
the contrary, in the event the benefits intended to
be provided to the Executive pursuant to Section
5(a)(iii) hereof are required to be reduced in whole
or in part because the value of such Employee
Benefits, when added to the amount of the Severance
Payment under Section 5(a)(i), would be "parachute
payments" that exceed the 299% Amount, the Executive
shall have the option to elect to receive, in lieu of
all or a portion of the Severance Payment provided in
Section 5(a)(i) hereof, one or more Employee
Benefits, provided, that (A) prior to the receipt of
any payment under Section 5(a)(i) hereof, the
Executive gives the Company notice of such election
specifying the Employee Benefit or Employee Benefits
so elected to be received, and (B) in no event shall
the "aggregate present value of the payments in the
nature of compensation" (as that phrase is used in
Section 280G of the Code) received by the Executive
as a result of the receipt of such Employee Benefits,
when added to the remaining portion of the Severance
Payment, if any, to be received by the Executive,
exceed the 299% amount.
(v) In addition to all other compensation due to the
Executive, the following shall occur immediately
following the occurrence of a Change in Control:
(A) all Company stock options held by the
Executive prior to a Change in Control shall
be exercisable, regardless of whether or not
the vesting/performance conditions set forth
in the relevant agreements shall have been
satisfied in full;
(B) all restrictions on any restricted
securities granted by the Company to the
Executive prior to a Change in Control shall
be removed and the securities shall be fully
vested and freely transferable, regardless
of whether the vesting/performance
conditions set forth in the relevant
agreements shall have been satisfied in
full;
(C) the Executive shall have an immediate right
to receive all performance shares granted
prior to a Change in Control, and such
performance shares shall be fully vested and
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freely transferable without restrictions,
regardless of whether or not specific
performance goals set forth in the relevant
agreements shall have been attained; and
(D) all performance units granted to the
Executive prior to a Change in Control shall
be immediately payable in cash or Common
Stock, at the Executive's sole option,
regardless of whether or not the relevant
performance cycle has been completed, and
regardless of whether any other terms and
conditions of the relevant agreements shall
have been satisfied in full.
(b) Upon written notice given by the Executive to the Company
prior to the receipt of any payment pursuant to Section 5(a)
hereof, the Executive, at the Executive's sole option, without
reduction to reflect the present value of such amounts as
aforesaid, may elect to have all or any of the Severance
Payment payable pursuant to Section 5(a)(i) hereof paid to the
Executive on a quarterly or monthly basis during the remainder
of the Period of Employment.
(c) There shall be no right of set-off or counterclaim in respect
of any claim, debt or obligation against any payment to or
benefit (including Employee Benefits) of the Executive
provided for in this Agreement.
(d) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment required to
be made hereunder on a timely basis, the Company shall pay
interest on the amount thereof at an annualized rate of
interest equal to the then-applicable Discount Rate or, if
lesser, the highest rate allowed by applicable usury laws.
6. No Mitigation Obligation: The Company hereby acknowledges that it
will be difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Termination Date and that the noncompetition
covenant contained in Section 7 hereof will further limit the employment
opportunities for the Executive. Accordingly, the parties hereto expressly agree
that the payment of the severance compensation by the Company to the Executive
in accordance with the terms of this Agreement will be liquidated damages, and
that the Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings or other benefits from any source whatsoever
create any mitigation, offset, reduction or any other obligation on the part of
the Executive hereunder or otherwise, except as expressly provided in Section
5(a)(iii) hereof.
7. Competitive Activity: During a period ending one (1) year following
the Termination Date, if the Executive shall have received or shall be receiving
benefits under Section 5(a) hereof, the Executive shall not, without the prior
written consent by the Company, directly or indirectly engage in the business of
developing products competitive with the business of the Company within the
United States of America and any other geographical area
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served by the Company during the twelve (12) month period immediately preceding
termination of the Executive's employment with the Company nor will the
Executive engage, within such geographical area(s), in the design, development,
distribution, manufacture, assembly or sale of a product or service in
competition with any product or service marketed or planned by the Company
immediately prior to the Termination Date, the plans, designs or specifications
of which have been revealed to the Executive. The Executive acknowledges that
these limited prohibitions are reasonable as to time, geographical area and
scope of activities to be restrained and that the limited prohibitions do not
impose a greater restraint than is necessary to protect the Company's goodwill,
proprietary information and other business interests. "Competitive Activity"
shall not include (i) the mere ownership of a de minimis amount of securities in
any such enterprise and exercise of rights appurtenant thereto or (ii)
participation in management of any such enterprise or business operation thereof
other than in connection with the competitive operation of such enterprise.
8. Legal Fees and Expenses: It is the intent of the Company that the
Executive not be required to incur the expenses associated with the enforcement
of the Executive's rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any litigation designed to deny, or to recover from, the Executive
the benefits intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive's choice, at the expense of the Company as hereafter provided, to
represent the Executive in connection with the litigation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship with
such counsel (other than Winstead Sechrest & Minick P.C.), and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. The Company shall pay or
cause to be paid and shall be solely responsible for any and all attorneys' and
related fees and expenses incurred by the Executive as a result of the Company's
failure to perform this Agreement or any provision thereof or as a result of the
Company or any person contesting the validity or enforceability of this
Agreement or any provision thereof as aforesaid.
9. Employment Rights: Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company prior to any Change
in Control; provided, however, that any termination of employment of the
Executive or removal of the Executive as an officer of the Company following the
commencement of any discussion with a third person that ultimately results in a
Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for purposes of this Agreement.
10. Withholding of Taxes: The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
13
11. Successors and Binding Agreement:
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization
or otherwise) to all or substantially all of the business
and/or assets of the Company, to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such
succession had taken place. This Agreement shall be binding
upon and inure to the benefit of the Company and any successor
to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of
the business and/or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such
successor shall thereafter be deemed the "Company" for the
purposes of this Agreement). This Agreement shall not
otherwise be assignable, transferable or delegable by the
Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees and/or legatees.
(c) This Agreement is personal in nature and neither of the
parties hereto shall, without the consent of the other,
assign, transfer or delegate this Agreement or any rights or
obligations hereunder except as expressly provided in Section
11(a) hereof. Without limiting the generality of the
foregoing, the Executive's right to receive payments hereunder
shall not be assignable, transferable or delegable, whether by
pledge, creation of a security interest or otherwise, other
than by a transfer by the Executive's will or by the laws of
descent and distribution and, in the event of any attempted
assignment or transfer contrary to this Section 11(c), the
Company shall have no liability to pay any amount so attempted
to be assigned, transferred or delegated.
(d) The Company and the Executive recognize that each Party will
have no adequate remedy at law for breach by the other of any
of the agreements contained herein and, in the event of any
such breach, the Company and the Executive hereby agree and
consent that the other shall be entitled to a decree of
specific performance, mandamus or other appropriate remedy to
enforce performance of this Agreement.
12. Applicable Law: THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND THE LAWS OF THE UNITED STATES OF AMERICA AND WILL, TO THE
MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN TARRANT COUNTY,
TEXAS. COURTS WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION OVER ANY AND ALL
DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING OUT OF OR
RELATING TO
14
THIS AGREEMENT. THE PARTIES CONSENT TO AND AGREE TO SUBMIT TO THE JURISDICTION
OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER IN FEDERAL OR STATE COURT,
WILL BE LAID IN TARRANT COUNTY, TEXAS. EACH OF THE PARTIES HEREBY WAIVES, AND
AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE
FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III) ANY LITIGATION COMMENCED
IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
13. Notices: All notices, demands, requests or other communications
that may be or are required to be given, served or sent by either party to the
other party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
<Table>
(a) If to the Company: Tandy Brands Accessories, Inc.
690 East Lamar Boulevard
Suite 200
Arlington, Texas 76011
Facsimile Transmission No.:
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Attn:
------------------------------------
with a copy (which will
not constitute notice) to: Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, Texas 75270
Facsimile Transmission No.: (214) 745-5390
Attn: Bruce A. Cheatham
If to the Executive:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Facsimile Transmission No.:
--------------
Attn:
------------------------------------
with a copy (which will
not constitute notice) to:
-----------------------------------------
-----------------------------------------
-----------------------------------------
Facsimile Transmission No.:
--------------
Attn:
------------------------------------
</Table>
15
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
14. Gender: Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
15. Amendment: This Agreement may not be amended or supplemented except
pursuant to a written instrument signed by the party against whom such amendment
or supplement is to be enforced. Nothing contained in this Agreement will be
deemed to create any agency, joint venture, partnership or similar relationship
between the parties to this Agreement. Nothing contained in this Agreement will
be deemed to authorize either party to this Agreement to bind or obligate the
other party.
16. Counterparts: This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
17. Severability: If any of the provisions of this Agreement are
determined to be invalid or unenforceable, such invalidity or unenforceability
will not invalidate or render unenforceable the remainder of this Agreement, but
rather the entire Agreement will be construed as if not containing the
particular invalid or unenforceable provision or provisions, and the rights and
obligations of the parties will be construed and enforced accordingly. The
parties acknowledge that if any provision of this Agreement is determined to be
invalid or unenforceable, it is their desire and intention that such provision
be reformed and construed in such manner that it will, to the maximum extent
practicable, be deemed to be valid and enforceable.
18. Third Parties: Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement.
19. Waiver: No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
20. Prior Agreements: This Agreement is voluntarily entered into and
upon the occurrence of a Change in Control will supersede and take the place of
any prior change in control, severance or employment agreements between the
parties hereto. The parties hereto expressly agree and hereby declare that any
and all prior change in control, severance or employment agreements between the
parties are terminated and of no force or effect.
16
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
COMPANY:
TANDY BRANDS ACCESSORIES, INC.
By:
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Name:
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Title:
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EXECUTIVE:
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