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Exhibit 10.24
SEVERANCE AGREEMENT
THIS AGREEMENT between Cyrk, Inc., a Delaware Corporation (hereinafter referred
to as the "Company"), and Ted L. Axelrod (hereinafter referred to as the
"Executive"), dated as of this 20th day of November, 1998:
WHEREAS, Executive is a key executive of the Company and an integral part of its
management;
WHEREAS, the Company recognizes that the possibility that changes in management
of the Company may result in the departure or distraction of Executive to the
detriment of the Company and its shareholders;
WHEREAS, the Company wishes to assure Executive of fair severance should his
employment terminate in specified circumstances and to assure Executive of
certain other benefits in such circumstances;
NOW THEREFORE, in consideration of Executive's continued employment with the
Company and other good and valuable consideration, the parties agree as follows:
1. SEVERANCE BENEFITS FOLLOWING QUALIFIED TERMINATION.
1.1. BASIC BENEFITS. Executive shall be entitled to the following
benefits upon a Qualified Termination (as that term is defined in
EXHIBIT A, attached hereto):
(a) Within thirty (30) days following the Qualified Termination,
the Company shall pay the following to Executive in a lump
sum:
(i) an amount equal to (3) times Executive's Base Salary
for one (1) year at the rate in effect immediately
prior to the Qualified Termination, plus the accrued
and unpaid portion of Executive's Base Salary, if
any, through the date of the Qualified Termination;
(ii) an amount equal to three (3) times the bonus earned
by Executive for the completed fiscal year
immediately preceding the Qualified Termination; and
(iii) an amount equal to three (3) times the amount
contributed by the Company (not including salary
reduction contributions elected by the Executive) to
the Executive's account in the Company's combined
401(k) compensation deferral plan and profit sharing
plan for the completed fiscal year immediately
preceding the Qualified Termination.
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(b) Until the second anniversary of the Qualified Termination, the
Company shall maintain in full force and effect for the
continued benefit of Executive and his family all life,
medical, dental, vision and disability insurance plans and
other benefit programs (including without limitation
outplacement assistance, accounting services and rental,
insurance, maintenance and fuel costs in connection with the
lease of an automobile) in which Executive was entitled to
participate immediately prior to the Qualified Termination;
provided, that if Executive's continued participation is not
possible under the terms of such plans and programs, the
Company shall instead arrange to provide Executive with
substantially similar benefits upon comparable terms.
Notwithstanding the foregoing, the Company's obligations
hereunder to Executive with respect to life, medical, or
disability coverage or benefits shall be deemed satisfied to
the extent (but only to the extent) of any such coverage or
benefits provided to Executive by another employer.
1.2. OPTIONS AND OTHER STOCK AWARDS. In the event of a Qualified
Termination or termination of Executive's employment due to death or
Disability, all options and stock appreciation rights granted under
the Company's various stock plans to Executive as of the date of the
termination shall, notwithstanding any provision of such plans to
the contrary, be exercisable and shall remain exercisable until the
earlier of (i) the fifth anniversary of such termination, or (ii)
the latest date on which such option or right could have been
exercised.
1.3. COORDINATION WITH PARACHUTE TAX RULES. Payments under Sections 1.1
and 1.2 shall be made without regard to whether the deductibility of
such payments (or any other payments to or for the benefit of
Executive) would be limited or precluded by Internal Revenue Code
Section 280G and without regard to whether such payments (or any
other payments) would subject Executive to federal excise tax levied
on certain "excess parachute payments" under Internal Revenue Code
Section 4999; PROVIDED, that if the total of all payments to or for
the benefit of Executive, after reduction for all federal taxes
(including the tax described in Internal Revenue Code Section 4999,
if applicable) with respect to such payments ("Executive's total
after-tax payments"), would be increased by the limitation or
elimination of any payments under Sections 1.1 and 1.2, amounts
payable under Sections 1.1 and 1.2 shall be reduced to the extent,
and only to the extent, necessary to maximize Executive's total
after-tax payments. The determination as to whether and to what
extent payments under Sections 1.1 and 1.2 are required to be
reduced in accordance with the preceding sentence shall be made at
the Company's expense by PricewaterhouseCoopers or by such other
certified public accounting firm, law firm, or benefits consulting
firm as the Compensation Committee of the Company's Board of
Directors may designate. In the event of any underpayment or
overpayment under Sections 1.1 and 1.2 as determined by
PricewaterhouseCoopers (or such other firm as may
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have been designated in accordance with the preceding sentence), the
amount of such underpayment or overpayment shall forthwith be paid
to Executive or refunded to the Company, as the case may be, with
interest at the applicable federal rate provided for in Section
7872(f)(2) of the Internal Revenue Code.
2. NONCOMPETITION.
2.1. Following a Qualified Termination, Executive agrees that he will not
become an employee, consultant, or advisor to any competitor of the
Company for a period of twelve (12) months from the date of such
Qualified Termination.
2.2. NO DUTY TO MITIGATE DAMAGES. Executive's benefits under this
Agreement shall be considered severance pay in consideration of his
past service and his continued service from the date of this
Agreement, and his entitlement thereto shall neither be governed by
any duty to mitigate his damages by seeking further employment nor
offset by any compensation that he may receive from future
employment, except as provided in Section 1.1(b).
2.3. OTHER AGREEMENTS. If for any reason Executive receives severance
payments (other than under this Agreement) from the Company or its
subsidiaries upon the termination of his employment with the
Company, the amount of such payments shall be deducted from the
amount paid under this Agreement. The purpose of this provision is
solely to avert a duplication of benefits; and neither this
provision nor the provisions of any other agreement shall be
interpreted to reduce the amount payable to Executive below the
greater of the amount that would otherwise have been payable under
this Agreement or under other agreements.
2.4. WITHHOLDING. All payments required to be made by the Company
hereunder to Executive shall be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as the
Company may reasonably determine it must withhold pursuant to any
applicable law or regulation.
3. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled exclusively by
single-arbitrator arbitration, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect,
and judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
4. LEGAL FEES AND EXPENSES. The Company shall pay all legal fees and expenses,
including but not limited to counsel fees, stenographer fees, printing
costs, etc., reasonably incurred by Executive in contesting or disputing in
good faith that the termination of his employment is for Cause or other
than good reason (as defined in EXHIBIT A) or in seeking in good faith to
obtain any right or benefit to which Executive believes he is entitled
under this Agreement. Any amount payable under this
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Agreement that is not paid when due shall accrue interest at the prime rate
as from time to time in effect at the Company's agent bank until paid in
full.
5. NOTICE OF TERMINATION. Executive's employment may be terminated by the
Company (or a Subsidiary) only upon thirty (30) days' written notice to
Executive, and by the Executive only upon thirty (30) days' written notice
to the Company.
6. NOTICES. All notices shall be in writing and shall be deemed given five (5)
days after mailing in the continental United States by registered or
certified mail, or upon personal receipt after delivery, telex, telecopy,
or telegram, to the party entitled thereto at the address stated below or
to such changed address as the addressee may have given by a similar
notice:
TO THE COMPANY: Cyrk, Inc.
3 Pond Road
Gloucester, MA 01930
Attn: President
WITH A COPY TO: Patrician J. Landgren, Esq.
TO EXECUTIVE: Ted L. Axelrod
43 Clark Road
Sudbury, MA 01776
7. GENERAL PROVISIONS.
7.1. BINDING AGREEMENT. This Agreement shall be binding upon and inure to
the benefit of the parties and be enforceable by Executive's
personal or legal representatives or successors if Executive dies
while any amounts would still be payable to him hereunder, benefits
would still be provided to this family hereunder, or rights would
still be exercisable by him hereunder as if he had continued to
live. Such amounts shall be paid to Executive's estate, such
benefits shall be provided to Executive's family, and such rights
shall remain exercisable by Executive's estate in accordance with
the terms of this Agreement. This Agreement shall not otherwise be
assignable by Executive.
7.2. SUCCESSORS. This Agreement shall inure to and be binding upon the
Company's successors. The Company shall require any successor to all
or substantially of the business and/or assets of the Company by
sale, merger (where the Company is not the surviving corporation),
consolidation, lease or otherwise, by agreement in form and
substance satisfactory to Executive, to assume this Agreement
expressly. This Agreement shall not otherwise be assignable by the
Company.
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7.3. AMENDMENT OR MODIFICATION; WAIVER. This Agreement may not be amended
or modified unless agreed to in writing by Executive and the
Company. No waiver by either party of any breach of this Agreement
shall be deemed a waiver of a subsequent breach.
7.4. SEVERABILITY. In the event that any provision of this Agreement
shall be determined to be invalid or unenforceable, such provision
shall be enforceable in any jurisdiction in which valid and
enforceable, and in any event the remaining provisions shall remain
in full force and effect to the fullest extent permitted by law.
7.5. CONTINUED EMPLOYMENT. This Agreement shall not give Executive any
right of continued employment or any right to compensation or
benefits from the Company or any Subsidiary, except for the rights
specifically stated herein, including those certain severance and
other benefits that become due in the event of a Qualified
Termination.
7.6. GOVERNING LAW. The validity, interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
8. EXCLUSIVE AGREEMENT. It is agreed and understood that this Agreement
represents the entire agreement between the Company and Executive
concerning the subject matter hereof, and supersedes all prior agreements
and understandings concerning Executive's rights upon the termination of
his employment, including without limitation any change of control
agreement that may be in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
Cyrk, Inc. Executive
By its Authorized Representative
By: /s/ Joseph W. Bartlett /s/ Ted L. Axelrod
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Name: Joseph W. Bartlett Ted L. Axelrod
Title: Chairman, Compensation Committee Executive Vice President
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EXHIBIT A
DEFINITIONS
The following terms as used in this Agreement have the following meanings:
(a) "BASE SALARY" means Executive's annual base salary, exclusive of any bonus
or other benefits he may receive.
(b) "CAUSE" means conviction of a felony, or wilful and deliberate misconduct
to the detriment of the Company about which Executive has been warned in
writing and given a fair opportunity to address and/or cure. For purposes
of this Agreement, Executive shall not be deemed to have been terminated
for Cause until the later to occur of:
(i) the 30th day after notice of termination is effective as provided in
Section 5 of the Severance Agreement, or
(ii) the delivery to Executive of a resolution duly adopted by the
affirmative vote of not less than a majority of the Company's
directors at a meeting called and held for that purpose (after
reasonable notice to Executive), and at which Executive together
with his counsel was given an opportunity to be heard, finding that
Executive was guilty of conduct described in the definition of
"Cause" above, and specifying the particulars thereof in reasonable
detail;
PROVIDED, HOWEVER, that the Company may suspend Executive and withhold
payment of his Base Salary from the date that notice of termination is
given until the earliest to occur of (a) termination of Executive for Cause
effected in accordance with the foregoing procedures (in which case
Executive shall not be entitled to his Base Salary for such period), or (b)
a determination by a majority of the Company's directors that Executive was
not guilty of the conduct described in the definition of "Cause" above (in
which case Executive shall be reinstated and paid any of his previously
unpaid Base Salary for such period), or (c) the 90th day after notice of
termination is given (in which case Executive shall be reinstated and paid
any of his previously unpaid Base Salary for such period).
(c) "COMPANY" means Cyrk, Inc. or any successor.
(d) "DISABILITY" has the meaning given it in the primary long-term disability
plan of the Company in which Executive participates. Executive's employment
shall be deemed terminated for Disability when Executive is entitled to
receive long-term disability compensation pursuant to such long-term
disability plan. If the Company does not maintain such a plan, Executive
shall be deemed terminated for Disability if the Company terminates his
employment due to illness, injury, accident, or condition of either a
physical or psychological nature as a result of which Executive is unable
to perform substantially the duties and responsibilities of his position
for 180 days during a period of 365 consecutive calendar days.
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(e) "QUALIFIED TERMINATION" means the termination of Executive's employment (i)
by the Company other than for Cause or Disability, both as herein defined,
or (ii) by Executive for good reason. For purposes of this definition,
termination for "good reason" means the voluntary termination by Executive
of his employment within 120 days after the occurrence without Executive's
express written consent of any of the following events, provided that
Executive gives notice to the Company at least thirty (30) days in advance
of such termination requesting that the situation be remedied, and said
situation remains unremedied upon expiration of such thirty (30) day
period:
(i) assignment to Executive of any duties inconsistent with his
positions, duties, responsibilities, reporting requirements, or
status within the Company (or a Subsidiary) immediately prior to the
effective date of the Severance Agreement; a diminution in
Executive's title(s) or office(s) as in effect immediately prior to
the effective date of the Severance Agreement; or any removal of
Executive from or any failure to reelect him to such positions,
except in connection with the termination of Executive's employment
for Cause or Disability or termination by Executive other than for
good reason; or
(ii) reduction in Executive's rate of Base Salary for any fiscal year to
less than 100 percent (100%) of the rate of Base Salary paid to him
in the completed fiscal year immediately prior thereto, or reduction
in Executive's total cash compensation, including salary, bonus and
incentives, for any fiscal year to less than 100 percent (100%) of
the total cash compensation paid to him in the completed fiscal year
immediately prior thereto; or
(iii) failure of the Company (or a Subsidiary) to continue in effect any
retirement, life insurance, medical insurance, or disability plan in
which Executive was participating immediately prior to the effective
date of the Severance Agreement unless the Company (or a Subsidiary)
provides Executive with a plan or plans that provide substantially
similar benefits, or the taking of any action by the Company (or a
Subsidiary) that would adversely affect Executive's benefits under
any of such plans or deprive Executive of any material fringe
benefits enjoyed by Executive immediately prior to the effective
date of the Severance Agreement; or
(iv) any materially adverse change in Executive's responsibilities,
authorities or other terms or conditions of employment at the
Company relative to those he enjoyed as of the effective date of the
Severance Agreement;
(v) any relocation of Executive to a site of employment more than 25
miles from his primary residence or office at the Company as of the
effective date of the Severance Agreement; or
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(vi) any purported termination of Executive's employment by the Company
(or a Subsidiary) for Cause which is not effected in compliance with
paragraph (b) of this EXHIBIT A.
(f) "SUBSIDIARY" means any corporation in which the Company owns, directly or
indirectly, 50 percent (50%) or more of the total combined voting power of
all classes of stock.
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