EXHIBIT 10.23
TERMINATION AGREEMENT AND RELEASE
This TERMINATION AGREEMENT AND RELEASE (the "Agreement") is entered into
this 23rd day of July, 2001 by and between Catalina Lighting, Inc. (the
"Company") and David Sasnett ("Employee").
Whereas, the Company and the Employee are parties to an employment
agreement, dated October 1, 2000 (the "Employment Agreement").
Whereas, the Company and the Employee have contemplated but not executed a
consulting and noncompetition agreement, dated September 30, 1999 (the
"Consulting Agreement").
Whereas, the Company has entered into that certain Amended and Restated
Stock Purchase Agreement (the "Stock Purchase Agreement") dated July 23, 2001
between the Company and Sun Catalina Holdings, LLC ("Sun Catalina") and that
certain Amended and Restated Note Purchase Agreement dated July 23, 2001 between
the Company and Sun Catalina (the "Note Purchase Agreement," and together with
the Stock Purchase Agreement, the "Purchase Agreements").
Whereas, upon consummation of the transactions contemplated by the
Purchase Agreements, Sun Catalina or its affiliates will have the ability to
appoint a majority of the Board of Directors of the Company (the "Board").
Whereas, the Employment Agreement provides for certain payments to be made
by the Company to Employee upon an Acquisition of Control as defined in the
Employment Agreement, and the consummation of the transactions contemplated by
the Purchase Agreements could constitute such an Acquisition of Control.
Whereas, the Company and Employee desire to reach a settlement with
respect to the amounts that may be due to Employee under the Employment
Agreement and the Consulting Agreement.
Now, therefore, in consideration of the mutual promises contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and Employee agree as follows:
1. Termination. Effective on and as of July 23, 2001, (the "Termination
Date"), the Employment Agreement and the Consulting Agreement are hereby
terminated. This termination includes without limitation the cancellation of
certain restrictions on the Employee as set forth in Article 6 of the Employment
Agreement and Article 4 of the Consulting Agreement.
2. Payments. In full and final settlement of any liability the Company may
have to pay any amounts to Employee under the Employment Agreement and the
Consulting Agreement, the Company shall make the payments described in this
Section 2 to Employee.
(a) The Company shall pay the Employee the aggregate sum of $280,000
in twelve equal payments of $23,333 commencing on September 1, 2001 and seriatim
quarterly thereafter on December 1, March 1, June 1, and September 1 of each
year, beginning December 1, 2001 and ending with a final payment of $23,333 on
June 1, 2004. To the extent Employee owes any sums to the Company, pursuant to a
promissory note which the Employee fails to repay within thirty days of the date
of this Agreement, or otherwise, the payments described in this Section 2(b) may
be retained by the Company to offset such amounts due. The payments described in
this paragraph (a) are not contingent upon the Employee's continued employment
with the Company. In the event of the Employee's death, the payments described
in this paragraph (a) will be payable to the Employee's beneficiaries or heirs.
(b) Upon the later of (i) the execution of this Agreement and the
Voting Agreement attached hereto as Exhibit A, or (ii) the approval by the
Company's shareholders of an increase in the number of authorized shares of the
Company's common stock, the Company shall grant to the Employee non-qualified
options (options that are not "incentive stock options" as that term is defined
under the Internal Revenue Code) to purchase 184,615 shares of the Company's
common stock, which options shall vest immediately. The exercise price of the
options shall be $1.18 per share. The options granted hereunder shall be fully
vested at the time of grant with an exercise period of ten (10) years from the
date of this Agreement. In the event of the Employee's death, the Employee's
options will be assignable to the Employee's heirs or beneficiaries. In the
event of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made to the number of the Employee's
options and to the exercise price of such options. The options will otherwise be
subject to the terms of the Company's generally applicable option grant
agreement. The options described in this paragraph (b) are not contingent upon
the Employee's continued employment with the Company.
(c) Notwithstanding the provisions of Section 2(a), the Company
shall make no payment or distribution of any kind to the Employee pursuant to
Section 2(a), whether direct or indirect (by set-off or otherwise) and whether
in cash, securities or other property, (i) at any time during which a "senior
default" (as that term is defined in the Junior Subordination Agreement) shall
have occurred and be continuing (not waived or cured), or (ii) if after giving
effect to such payment or distribution, the Company would be in violation of
Section 8.08 of the "Senior Credit Agreement" (as that term is defined in the
Junior Subordination Agreement). Any such payment or distribution which is due
but unpaid as a result of the application of the immediately preceding sentence
shall be accrued by the Company and paid or distributed, without interest,
promptly at such time as neither of the conditions referenced in clauses (i) and
(ii) of this
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Section 2 (c) exists. The "Junior Subordination Agreement" means that certain
Junior Subordination Agreement dated July 23, 2001, by and among the Company,
the Employee and certain other parties thereto.
(d) Notwithstanding any other provision of this Agreement to the
contrary, the Company and the Employee acknowledge and agree that in the event
that the Company, as a result of the occurrence of the conditions set forth in
Section 2(c) of this Agreement, fails to make any of the payments described in
Section 2(a) of this Agreement, the Employee has the option to elect to waive
the right to receive any and all unpaid (or accrued and unpaid) payments from
the Company under this Agreement and the "New Employment Agreement" (the new
employment agreement between the Company and the Employee entered into
concurrently with this Agreement) in return for being released from the
covenants described in Section 8(c) and 8(d). The Employee acknowledges and
agrees that if he exercises this option to waive the right to any and all unpaid
(or accrued and unpaid) payments, the Employee has no right to bring a claim
against the Company, Sun Catalina or any of their affiliates for payment after
exercising this option. The Employee further acknowledges and agrees that the
right to be released from the covenants in Section 8(c) and 8(d) as described in
the preceding sentence is available to the Employee only if the failure to make
a payment described in Section 2(a) is not corrected by the Company before the
Employee has elected to waive the right to receive any and all payments under
this Agreement and the New Employment Agreement.
3. Employee Release. In exchange for the payments provided in Section 2,
the Employee waives and releases unconditionally, for himself and his heirs, any
and all rights, claims, demands, causes of action, obligations and liabilities
known or unknown, arising from the date of the Employee's commencement of
employment to the date of the execution of this Agreement, related to the
Employment Agreement and the Consulting Agreement, and all claims for attorneys'
fees and costs related thereto.
4. Company Release. In exchange for the Employee's agreement to the terms
of this Agreement, the Company waives and releases unconditionally, for itself
and its subsidiaries and their respective successors and assigns, any and all
rights, claims, demands, causes of action, obligations and liabilities known or
unknown, arising from the date of the Employee's commencement of employment to
the date of the execution of this Agreement, related to the Employment Agreement
and the Consulting Agreement, and all claims for attorneys' fees and costs
related thereto.
5. Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.
6. Employee Acknowledgment.
(a) The Employee acknowledges that the Employee (i) has read this
Agreement, (ii) has had the opportunity to consider this Agreement, (iii) has
been advised
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by this document to seek legal counsel if he chooses, (iv) understands this
Agreement and all of its terms, (v) signs this Agreement voluntarily and without
duress, and (vi) signs this Agreement in exchange for payments and options
described in Section 2, which payments and options the Employee acknowledges are
adequate and satisfactory.
(b) The Employee agrees that this Agreement is not and shall not be
construed to be an admission of any violation of any federal, state or local
statute, ordinance or regulation, or common law, or of any duty owed the
Employee by the Company.
7. Full Satisfaction. The Employee hereby agrees that this Agreement is in
compromise and final settlement among the parties of all disputed matters and
constitutes full satisfaction of all claims related to the Employment Agreement
and the Consulting Agreement.
8. Confidentiality; Nonsolicitation; Noncompetition.
(a) The Employee covenants and agrees that he will not, in any
material respect, at any time, disclose, directly or indirectly, or make
available to any person, corporation, firm, or other entity, or in any manner
use for his own benefit, any confidential information or trade secrets relating
to the business and operations of the Company, any of its subsidiaries or any of
their respective affiliates (collectively, the "Group"), including, without
limitation, business strategies, operating plans, acquisition strategies
(including the identities of (and any other information concerning) possible
acquisition candidates), pro forma financial information, market analysis,
acquisition terms and conditions, personnel information, product information,
sources of leads and methods of obtaining new business, know-how, customer lists
and relationships, supplier lists and relationships, distribution methods or any
other methods of doing and operating the business of the Group, or other
proprietary, trade secret and confidential information relating to the Group,
except to the extent that such disclosure (i) is made with the Board's written
consent, (ii) relates to information that is or becomes generally known by the
public other than as a result of a breach hereof, or (iii) is required to be
disclosed by law or judicial or administrative process; provided that, in the
case of clause (iii), the Employee provides the Company with prompt prior
written notice of such requirement and the terms of and circumstances
surrounding such requirement so that the Company may seek an appropriate
protective order or other remedy, or waive compliance with the terms of this
Agreement, and the Employee shall provide such cooperation with respect to
obtaining a protective order or other remedy as the Company shall reasonably
request. If a protective order or other remedy is not obtained, or if the
Company is required to waive compliance with the provisions hereof, the Employee
will furnish only that portion of such confidential information or trade secrets
which, as he is advised in a written opinion by his counsel, he is legally
required to furnish.
(b) The Employee covenants and agrees that for a period of three (3)
years from the date of this Agreement, the Employee shall not, either directly
or indirectly, for himself or on behalf of any other person, firm or entity,
employ, engage, retain or enter into a business affiliation with any person who
at any time during the
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twelve-month period preceding the execution of this Agreement was an employee
of, or consultant to, the Group for the purpose of soliciting or diverting any
such employee or consultant from the Group or otherwise interfering with the
business relationship of the Group with any of the foregoing.
(c) The Employee covenants and agrees that for a period of three (3)
years from the date of this Agreement, the Employee shall not, either directly
or indirectly, for himself or on behalf of any other person, firm or entity,
employ, engage, retain or enter into a business affiliation with any person who
at any time during the twelve-month period preceding the execution of this
Agreement was a supplier or customer of the Group for the purpose of diverting
any such supplier or customer from the Group or otherwise interfering with the
business relationship of the Group with any of the foregoing.
(d) The Employee covenants and agrees that for a period three (3)
years from the date of this Agreement, the Employee shall not, either directly
or indirectly, alone or as a partner, joint venturer, officer, director,
employee, lender, consultant, agent, independent contractor, stockholder or
otherwise, or permit any company or business organization directly or indirectly
controlled by him or any of his affiliates to, engage in any of the businesses
actually conducted by the Company or any of its subsidiaries (or any businesses
actively explored by the Company or any of its subsidiaries for the purpose of
conducting) in any place where the Company or any of its subsidiaries conducts
business or has conducted business (or has at any time actively explored
conducting businesses) during the two years preceding the execution of this
Agreement. The passive ownership by the Employee or his affiliates, of not more
than three percent (3%) of the shares of capital stock of any corporation having
a class of equity securities actively traded on a national securities exchange
or in the over-the-counter market shall not be deemed, in and of itself, to
violate the prohibitions of this paragraph.
(e) The Employee acknowledges that the agreements of this Section 8
are reasonable and necessary for the protection of the Company and the Group and
are an essential inducement to the Company's entering into this Agreement.
Accordingly, the Employee shall be bound by the provisions of this Agreement
(including the provisions of this Section 8) to the maximum extent permitted by
law, it being the intent and spirit of the parties that the foregoing shall be
fully enforceable. However, the parties further agree that, if any of the
provisions hereof shall for any reason be held to be excessively broad as to
duration, geographical scope, property or subject matter, such provision shall
be construed by limiting and reducing it so as to be enforceable to the extent
compatible with the applicable law as it shall herein pertain.
9. Cooperation in Litigation; Waiver of Trial By Jury.
(a) The Employee agrees to cooperate with the Company by making
himself reasonably available to testify on behalf of the Company or its
affiliates, in any
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action, suit or proceeding, whether civil, criminal, administrative, or
investigative, and to assist the Company or any of its affiliates in any such
action, suit, or proceeding by providing information and meeting and consulting
with its counsel and representatives. The Employee shall be fully reimbursed for
any out-of-pocket expenses reasonably incurred by the Employee in the course of
such cooperation.
(b) Each of the parties to this Agreement irrevocably and
unconditionally waives the right to a trial by jury in any action, suit or
proceeding.
10. Entire Agreement; Binding Effect. This Agreement sets forth the entire
agreement between the Employee and the Company related to the termination of
Employee's Employment Agreement and Consulting Agreement with the Company. As
such, this Agreement supersedes all of the terms of the Employee's Employment
Agreement and Consulting Agreement with the Company, including, without
limitation, the covenants contained therein relating to confidentiality,
nonsolicitation and limitations on the Employee's ability to compete with the
Company. The Employee and the Company intend this Agreement to be legally
binding and inure to the benefit of themselves and their respective heirs,
administrators, executors, successors and assigns.
11. Indemnification. The Company agrees to indemnify, hold harmless and
defend, the Employee, in and for any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments and any other costs, fees
and expenses ("Claims") in any way related to the Employee's prior or present
employment by the Company or in his capacity as an officer or director of the
Company, other than Claims attributable to or resulting from unlawful conduct of
the Employee or actions or inactions of the Employee constituting fraud, gross
negligence, bad faith, willful misconduct or a violation of the Company's
established policies. Within five (5) business days after being served with any
action in respect of any claim based upon the Employee's prior or present
employment by the Company or in his capacity as an officer or director of the
Company, the party who has been served shall give written notice of the action
to the other, which notice shall include full copies of all pleadings. The
Employee shall be entitled to participate in the defense of any such action, and
shall be copied and kept reasonably informed of the progress by the Company. No
settlement, compromise or other disposition of the action shall be made on the
Employee's behalf without the prior written consent of the Employee, which
consent shall not be unreasonably withheld. Upon written demand the Company
shall advance to or on behalf of the Employee all payments and such other sums
as may be required to satisfy the Company's obligations of indemnification,
including payment of costs and expenses currently as they are incurred by the
Employee; provided that the Company shall be entitled to prompt reimbursement of
such payments, costs and expenses in the event that it is later determined that
such Claims are not eligible for indemnification as described in the first
sentence of this paragraph. This Section is not intended to and shall not create
rights in favor of any insurance carrier.
12. Attorneys' Fees. In the event of litigation to enforce or interpret
this Agreement, all litigation expenses, including by way of illustration, but
not limitation, all
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reasonable attorneys' fees and paralegal fees, costs and expenses through all
trials, appeals and proceeding, mediation, arbitration, any proceedings pursuant
to the bankruptcy laws of the United States, shall be paid to the prevailing
party by the non-prevailing party.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with, the laws of the State of Florida without regard to conflict or
choice of law provisions that would defer to the substantive laws of another
jurisdiction.
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IN WITNESS WHEREOF, the Employee and the Company have executed this
Agreement on the date first written above.
EMPLOYEE
/s/ David Sasnett
----------------------------------------
David Sasnett
CATALINA LIGHTING, INC.
By: /s/ Robert Hersh
-------------------------------------
Name: Robert Hersh
Title: President and Chief Executive
Officer
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