EXHIBIT 10.21
TERMINATION AGREEMENT AND RELEASE
This TERMINATION AGREEMENT AND RELEASE (the "Agreement") is entered into
this 20th day of July, 2001 by and between Catalina Lighting, Inc. ("Catalina")
and ▇▇▇▇▇▇ ▇▇▇▇ ("Employee").
Whereas, Catalina and the Employee are parties to an employment agreement,
dated October 1, 1989, as amended by amendments dated August 27, 1990, October
1, 1990, June 26, 1991, June 10, 1992, October 1, 1993, October 1, 1994, June 4,
1999 and September 30, 1999 (the "Employment Agreement").
Whereas, Catalina and the Employee have contemplated but not executed a
consulting and noncompetition agreement, dated September 30, 1999 (the
"Consulting Agreement").
Whereas, Catalina has entered into that certain Amended and Restated Stock
Purchase Agreement (the "Stock Purchase Agreement") dated July 20, 2001 between
Catalina and Sun Catalina Holdings, LLC ("Sun Catalina") and that certain
Amended and Restated Note Purchase Agreement dated July 20, 2001 between
Catalina 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 Catalina (the "Board").
Whereas, the Employment Agreement provides for certain payments to be made
by Catalina to the 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, Catalina and the Employee desire to reach a settlement with
respect to the amounts that may be due to the 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, Catalina and the Employee agree as follows:
1. Termination. Effective on and as of July 20, 2001, (the "Termination
Date"), the Employment Agreement and the Consulting Agreement are hereby
terminated. The 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 Catalina may
have to pay any amounts to the Employee under the Employment Agreement and the
Consulting Agreement, Catalina shall make the payments described in this Section
2 to the Employee.
(a) Catalina shall pay the Employee $50,000.00 on September 1, 2001.
Thereafter Catalina shall pay the Employee an aggregate of $550,000.00 in eleven
consecutive quarterly payments of $50,000.00, on December 1, March 1, June 1,
and September 1 of each year, beginning December 1, 2001 and ending June 1,
2004. In the event of the Employee's death, the payments described under this
paragraph (a) will be payable to his heirs or beneficiaries.
(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
Catalina's shareholders of an increase in the number of authorized shares of
Catalina's common stock, Catalina 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 461,538 shares of Catalina'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 Catalina,
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 Catalina's generally applicable option grant agreement.
(c) Notwithstanding the provisions of Section 2(a), Catalina 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, Catalina 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 Catalina and paid or distributed, without interest, promptly
at such time as neither of the conditions referenced in clauses (i) and (ii) of
this Section 2 (c) exists. The "Junior Subordination Agreement" means that
certain Junior Subordination Agreement dated July 20, 2001, by and among
Catalina, the Employee and certain other parties thereto.
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(d) Notwithstanding any other provision of this Agreement to the
contrary, Catalina and the Employee acknowledge and agree that in the event that
Catalina, 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 Catalina
under this Agreement and the Separation Agreement and Release in return for
being released from the covenants described in Section 9(c) and 9(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 Catalina, 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 9(c) and 9(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 Catalina before the Employee has elected to waive the right to
receive any and all payments under this Agreement and the Separation and Release
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 commencement of employment to the
date of execution of this Agreement which the Employee has or may have against
Catalina, whether or not 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, Catalina 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 commencement of employment to the date of
execution of this Agreement which Catalina has or may have against the Employee,
whether or not related to the Employment Agreement and the Consulting Agreement,
and all claims for attorneys' fees and costs related thereto.
5. Withholding Taxes. Catalina 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 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.
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(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 Catalina.
7. Nondisparagement.
(a) The parties agree that each will not, in any material respect,
directly or indirectly, disparage, harass, defame or instigate, request,
encourage, suggest, support or assist any person in disparaging, harassing or
defaming the other or any of the other's products or services, or disparage the
terms and conditions of this Agreement or the termination of the Employee's
employment with Catalina. This obligation extends to all statements, written or
oral, whether intended to be public or private.
(b) Each of Catalina and the Employee agree and acknowledge that the
covenants and promises of this paragraph constitute a material and significant
part of the consideration received by the other in exchange for its or his
obligations to the other under this Agreement and that any breach of this
Section 7, in any material respect, will constitute a material breach of this
Agreement.
(c) The Employee and Catalina submit to personal jurisdiction in the
courts of the State of New York located in New York City in connection with any
such claims.
8. Full Satisfaction. The Employee hereby agrees that this Agreement and
the Separation Agreement and Release between the Employee and Catalina 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.
9. 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 Catalina and any of its subsidiaries as of the
date of this Agreement (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
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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 Catalina with prompt prior written
notice of such requirement and the terms of and circumstances surrounding such
requirement so that Catalina 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 Catalina shall reasonably request. If a protective order or
other remedy is not obtained, or if Catalina 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 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. Notwithstanding the foregoing provisions of this paragraph (b),
the Employee shall not be prohibited from employing, engaging or retaining any
individuals who were previously employed at any work location in the Boston,
Massachusettes area that was previously operated by Catalina or any of its then
affiliates.
(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 of 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
presently conducted by the Group in any place where the Group presently conducts
business or has conducted business 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.
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(e) The Employee acknowledges that the agreements of this Section 9
are reasonable and necessary for the protection of Catalina and the Group and
are an essential inducement to Catalina's entering into this Agreement.
Accordingly, the Employee shall be bound by the provisions of this Agreement
(including the provisions of this Section 9) 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.
10. Cooperation in Litigation; Waiver of Trial By Jury.
(a) The Employee agrees to cooperate with Catalina by making himself
reasonably available to testify on behalf of Catalina or its affiliates, in any
action, suit or proceeding, whether civil, criminal, administrative, or
investigative, and to assist Catalina or any of its affiliates in any such
action, suit, or proceeding by providing information and meeting and consulting
with its counsel and representatives. Catalina shall provide the Employee with
reasonable notice of Catalina's need for the Employee's cooperation and shall
make all commercially reasonable efforts to ensure that Catalina will not
interrupt the Employee's then current employment or other activities. The
Employee shall be fully reimbursed for any out-of-pocket expenses reasonably
incurred by the Employee in the course of such cooperation. This paragraph (a)
shall not apply to any litigation in which Catalina or the Group and the
Employee are adverse parties.
(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.
11. Indemnification. Catalina 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 Catalina or in his capacity as an officer or director of Catalina,
other than Claims which, in a final judgement from which no further appeal is
permitted or available, are expressly determined to have been 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 Catalina'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 Catalina or in his capacity as an
officer or director of Catalina, 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 Catalina. 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 Catalina shall advance to or on behalf of the Employee all payments and
such other sums as may be required to satisfy Catalina's obligations of
indemnification,
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including payment of costs and expenses currently as they are incurred by the
Employee; provided that Catalina 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. Entire Agreement; Binding Effect. This Agreement and the Separation
Agreement and Release between the Employee and Catalina sets forth the entire
agreement between the Employee and Catalina related to the termination of
Employee's Employment Agreement and Consulting Agreement with Catalina. As such,
this Agreement supersedes all of the terms of the Employee's Employment
Agreement and Consulting Agreement with Catalina, including, without imitation,
the covenants contained therein relating to confidentiality, nonsolicitation and
limitations on the Employee's ability to compete with Catalina. The Employee
and Catalina intend this Agreement to be legally binding and inure to the
benefit of themselves and their respective heirs, administrators, executors,
successors and assigns.
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.
14. Attorney's Fees. In the event of litigation to enforce or interpret
this Agreement, all litigation expenses, including by way of illustration, but
not limitation, all reasonable attorney's 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.
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IN WITNESS WHEREOF, the Employee and Catalina have executed this Agreement
on the date first written above.
EMPLOYEE
/s/ ▇▇▇▇▇▇ ▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇
CATALINA LIGHTING, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President and Chief Executive Officer
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