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Exhibit
10.2
SEVERANCE AND
CONSULTANT AGREEMENT AND GENERAL RELEASE
This Severance and Consultant
Agreement and General Release (hereinafter referred to as the
“Agreement”) is entered into by and between Diedrich
Coffee, Inc, a Delaware corporation (hereinafter referred to as
“DIEDRICH”), and Matthew C. McGuinness (hereinafter
referred to as “MCGUINNESS”), an employee of
DIEDRICH.
WHEREAS, MCGUINNESS’
employment with DIEDRICH is being terminated, and in order to
settle and resolve any and all disputes including, but not limited
to, any differences that might arise out of MCGUINNESS’
employment with DIEDRICH and separation therefrom and any claims
which may arise out of the Employment Agreement entered into by and
between DIEDRICH and MCGUINNESS on or about February 11, 2004.
MCGUINNESS and DIEDRICH agree as follows:
1. TERMINATION OF
EMPLOYMENT
MCGUINNESS’ employment
with DIEDRICH will be terminated effective May 25,
2007.
2. PAYMENT OF MONEYS
OWED
MCGUINNESS acknowledges that
DIEDRICH has paid all remuneration owed to him as a result of his
employment with DIEDRICH, including, but not limited to his salary
through May 25, 2007 and all accrued vacation through
May 25, 2007.
3. SEVERANCE PAYMENT
Upon the execution of the
revocation period set forth in paragraph 20 below, DIEDRICH shall
make the following lump sum payments to MCGUINNESS:
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a. |
DIEDRICH will pay MCGUINNESS a lump sum severance payment of
One Hundred Eighty Seven Thousand, Five Hundred Dollars
($187,500.00) which equates to nine (9) months of
MCGUINNESS’ annual base pay at the time of termination. All
statutorily required deductions will be taken from this
amount. |
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b. |
DIEDRICH will pay MCGUINNESS a lump sum payment of Six
Thousand Three Hundred Dollars ($6,300.00), which equates to nine
(9) months of MCGUINNESS’ annual Automobile Allowance at
the time of termination. All statutorily required deductions will
be taken from this amount. |
4. CONSULTING SERVICES
| a. |
Term. MCGUINNESS and DIEDRICH agree that beginning on
May 25, 2007, MCGUINNESS will be available as a consultant for
DIEDRICH for a period of twelve (12) months, through and
including May 25, 2008 (the “Consulting Term”),
unless the Agreement is earlier terminated by either party in
accordance with section 4(b), below. |
| b. |
Termination. This Agreement may be terminated at any
time by written mutual agreement between DIEDRICH and MCGUINNESS.
In addition, DIEDRICH may terminate this Agreement at any time
during the Consulting Term “for cause”. For purposes of
this Agreement, the term “for cause” shall
mean: |
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(1) |
The willful failure or refusal to carry out the reasonable
directions and/or to be available to consult with the
President/Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer and/or Director of Franchise
Administration; |
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(2) |
A willful act by MCGUINNESS that constitutes gross negligence
in the performance of his duties under this Agreement and which
materially injures DIEDRICH. No act or failure to act by MCGUINNESS
shall be considered “willful” unless committed without
good faith and without a reasonable belief that the act or omission
was in DIEDRICH’S best interest; |
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(3) |
A conviction for a violation of a state or criminal law
involving the commission of a felony or other crime involving moral
turpitude; |
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(4) |
Making any comments relating to DIEDRICH or its employees which
are critical, derogatory or which may tend to injure the business
of DIEDRICH; or |
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(5) |
Unethical business practices, including fraud or dishonesty, in
connection with DIEDRICH’S business. |
| c. |
Services. MCGUINNESS agrees to make himself available
to provide consulting services to DIEDRICH during the Consulting
Term. Consultant shall perform duties and services and be available
to consult as directed by DIEDRICH’S President/Chief
Executive Officer, Chief Financial Officer, Chief Operating Officer
and/or Director of Franchise Administration. |
| d. |
Hours. MCGUINNESS agrees to devote the number of
hours necessary to perform the consulting services in a
satisfactory manner and further agrees that he shall devote a
minimum of four (4) hours per week in the performance of
services under the Consulting Agreement. MCGUINNESS shall be
entitled to schedule hours as he sees fit, as long as the hours are
compatible with the satisfactory completion of the requested
services. |
| e. |
Services for Others. MCGUINNESS is free to perform
services for entities other than DIEDRICH, provided that the other
entity has no business relationship with DIEDRICH and provided that
such other services do not interfere with or conflict with his
duties under this Agreement. Services performed for entities which
have any business relationship with DIEDRICH require written
permission from the Company prior to performance of such
services. |
| f. |
Compensation. DIEDRICH shall make the following
payment to MCGUINNESS for making himself available and for the
provision of any consulting services under this
Agreement: |
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1. |
DIEDRICH will pay MCGUINNESS a fee of five thousand, three
hundred and eighty-three dollars ($5,383.00) per month for twelve
months. This payment will be made on or about the 10th day of the
month. This payment shall be subject to 1099 reporting. |
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2. |
For all consulting services performed by MCGUINNESS, DIEDRICH
will pay to MCGUINNESS an hourly fee of One Hundred Seventy Five
Dollars ($175.00) per hour. This payment shall be subject to 1099
reporting. |
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3. |
The parties
agree that should a single transaction or divestiture generating
more than Five Million Dollars ($5,000,000.00) of gross proceeds to
DIEDRICH occur, and that in DIEDRICH’s sole discretion,
MCGUINNESS’ contribution to such a transaction is
significantly greater than that represented by hourly fees in
connection with the transaction, the parties will negotiate a
“success fee” in advance for all such projects on which
MCGUINNESS provides consulting services. This “success
fee” will be paid upon successful completion of such
transaction and any hourly fees paid to Consultant associated with
the project will be applied against such “success fee”,
with the balance payable to
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MCGUINNESS by DIEDRICH upon
receipt of the proceeds relating to the transaction. This payment
shall be subject to 1099 reporting.
| g. |
Expenses . DIEDRICH will pay all reasonable travel
and other out-of-pocket expenses incurred by MCGUINNESS in
conjunction with consulting assignments and this consulting
agreement. All expenses with associated receipts are to be
submitted to DIEDRICH within 30 days of the expenditure and are
subject to review and approval by DIEDRICH’S Chief Financial
Officer before payment is made. |
| h. |
Independent Contractor Status . MCGUINNESS shall be
responsible for all State and Federal taxes, including but not
limited to income taxes, payroll taxes, and taxes on
self-employment income, including quarterly estimates. MCGUINNESS
hereby agrees to make all appropriate and required filings with any
and all taxing authorities to account for and make all payments
required by local, state and federal authorities, including income
tax, social security, SDI and any other payments on behalf of
MCGUINNESS. MCGUINNESS further agrees to indemnify and hold
DIEDRICH harmless from and pay DIEDRICH’S cost to defend any
and all claims made by the above-mentioned taxing authorities, or
any others, resulting from or in any way connected to the payment
by DIEDRICH for services by MCGUINNESS in accordance with the terms
and conditions of the Agreement. If DIEDRICH determines at any time
that it is required to or should withhold taxes of any nature,
DIEDRICH reserves the right to unilaterally withhold such taxes as
appropriate, and to notify MCGUINNESS of such withholding in
writing within ten (10) days of the
withholding. |
MCGUINNESS shall at all times
act as an independent contractor with respect to the services
performed hereunder. Neither MCGUINNESS, nor any employee of
MCGUINNESS, shall be deemed to be an employee or agent of DIEDRICH,
or any of its affiliates, for any purpose. MCGUINNESS shall have
full right to determine the method and manner of performing the
services to be performed pursuant to this Agreement and MCGUINNESS
is totally responsible for his own operations. Neither MCGUINNESS
nor MCGUINNESS’ employees or agents shall be on the payroll
of DIEDRICH or any of its affiliates or to be treated as employees
of DIEDRICH or any or its affiliates for any purpose including
without limitation, payments of such benefits as are payable under
the California Unemployment Insurance Code and/or the California
Workers’ Compensation Act.
| i. |
Information . All reports and other data prepared,
compiled or obtained by MCGUINNESS in connection with the
performance of services hereunder shall be made available upon
request to DIEDRICH and its affiliates. All such materials may be
copied, |
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