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Exhibit 10.1 EMPLOYMENT SEPARATION AND GENERAL
RELEASE AGREEMENT This
Employment Separation and General Release Agreement (this "
Separation Agreement ") is entered into as of this 12th day
of December, 2008, by and between Thomas M. Kennedy, an individual
(" Individual "), and Pacific Sunwear of California, Inc., a
California corporation (the " Company ").
WHEREAS , Individual has been
employed as the Division President of the PacSun Division of the
Company; WHEREAS , the
Company and Individual previously entered into that certain
Employment Agreement dated as of April 1, 2005, as amended
September 28, 2007 (the " Employment Agreement ");
WHEREAS , Individual has been
designated as a participant in that certain Executive Severance
Plan initially approved and adopted by the Compensation Committee
of the Board of Directors on August 21, 2007, as amended (as
so amended, the " Executive Severance Plan ");
WHEREAS , Individual and the
Company mutually agreed to terminate Individual’s employment
relationship with the Company effective on December 9, 2008
(the " Separation Date ") upon the terms set forth herein;
and WHEREAS , Individual and
the Company desire to enter into this Separation Agreement and
supersede and replace the Employment Agreement and the Executive
Severance Plan. NOW,
THEREFORE , in consideration of the covenants undertaken and
the releases contained in this Separation Agreement, Individual and
the Company agree as follows:
I.
Resignation . Individual’s employment by the
Company terminated on the Separation Date without cause. Individual
hereby confirms that he resigned as an officer, director, employee,
member, manager and in any other capacity with the Company and each
of its subsidiaries effective as of the Separation Date and that he
currently holds no such position with the Company or any of its
subsidiaries. The Company confirms that it and each of its
subsidiaries accepted such resignation effective as of the
Separation Date. Individual agrees that he has no consulting
relationship with the Company or any of its subsidiaries.
Individual waives any right or claim to reinstatement as an
employee of the Company and any subsidiary of the Company (if any)
by which he was previously employed. Individual acknowledges and
agrees that he has received all amounts owed for his regular and
usual salary (including, but not limited to, any severance (other
than the Severance Benefits expressly provided for in, and subject
to the terms of, this Separation Agreement), overtime, bonus,
accrued vacation, commissions, or other wages), reimbursement of
expenses, and usual benefits, and that all payments due to
Individual from the Company and its subsidiaries after the
Separation Date shall be determined under this Separation
Agreement.
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II.
Severance .
(a) Subject
to Sections II(b) and II(c) below, the Company shall pay as
severance pay to Individual the following benefits (collectively
the " Severance Benefits "):
1.
Severance Pay . The Company shall provide as
severance pay to Individual the cash sum of $826,667.00 (the "
Severance Pay "), to be paid as follows: (a) the
Company shall pay to Individual the cash sum of $413,333.50,
representing one-half of the total amount of Severance Pay due
hereunder, on June 10, 2009; and (b) the Company shall
pay the remaining one-half of the Severance Pay in six equal
monthly installments of $68,888.92 beginning on the Company’s
first regular payroll date in July 2009 and continuing on the
Company’s first regular payroll date each month thereafter
until and including December 2009. Notwithstanding the
foregoing provisions, if a "Change in Control Event" (as defined in
the Executive Severance Plan) occurs at any time after the
Separation Date, the aggregate amount of any remaining unpaid
installments of Severance Pay due under this Section shall be paid
to Individual in cash in a lump sum on the later of
(x) June 10, 2009, and (y) thirty (30) days
after the occurrence of such Change in Control Event. All payments
under this Section shall be paid without interest.
2.
Benefits Payment . The Company shall pay to
Individual a cash payment equal to the expected aggregate cost, as
reasonably determined by the Compensation Committee of the
Company’s Board of Directors, of premiums that would be
charged to the Individual to continue medical coverage pursuant to
COBRA (the " Benefits Payment ") for twelve (12) months
following the Separation Date. The Benefits Payment shall be paid
to the Individual in a lump sum (without interest) on June 10,
2009.
3.
Outplacement Services . The Company shall either pay
directly or reimburse Individual for the costs of outplacement
services obtained by Individual within the 12-month period
following the Separation Date up to a maximum of $10,000 (the "
Outplacement Benefit "). The Outplacement Benefit shall be
subject to the Company’s expense reimbursement policies in
effect immediately prior to the Severance Date and applicable to
the Company’s executives generally and shall be fully paid or
reimbursed, as applicable, by the Company not later than the end of
the Individual’s third taxable year following 2008.
Notwithstanding anything to the contrary herein, the payment or
reimbursement of the Outplacement Benefit incurred during the six
(6) month period following the Separation Date, if any, shall
be accumulated and paid by the Company on June 10, 2009
(subject to Individual’s compliance with the Company’s
expense reimbursement policies).
(b) The
Company’s obligation to pay the Severance Benefits (or any
portion thereof, as applicable) is subject to the condition
precedent that Individual shall have complied with the restrictive
covenants set forth in Section VII hereof. The Company shall
have no obligation to pay any portion of the Severance Benefits at
any time after a breach by Individual of any covenant set forth in
Section VII. Notwithstanding the foregoing provisions of this
Section II(b), however, in no event shall the amount of the
Severance Benefit actually paid by the Company to Individual be
less than Five Thousand Dollars ($5,000) in the aggregate,
regardless of any breach by Individual of the foregoing, which
amount the parties agree (in and
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of itself) is good and sufficient consideration for the Release
and other obligations of Individual under this Separation
Agreement.
(c) The
Company’s obligation to pay the Severance Benefits (or any
portion thereof, as applicable) is further subject to the condition
precedent that Individual shall not have revoked the Release set
forth in Section III hereof pursuant to any revocation rights
afforded by applicable law. The Company shall have no obligation to
pay the Severance Benefit to Individual unless and until the
Release becomes irrevocable by Individual under the Age
Discrimination in Employment Act of 1967.
(d) The
Severance Benefits payable under this Separation Agreement are in
lieu of any and all severance and other benefits to which
Individual may otherwise be entitled under his Employment Agreement
and/or the Company’s Executive Severance Plan as a result of
Individual’s termination of employment with the Company.
Individual agrees that the Severance Benefits received hereunder
shall not be deemed a part of Individual’s compensation for
purposes of the determination of benefits under any other employee
pension, welfare or other benefit plans or arrangements, if any,
provided by the Company or any of its subsidiaries, except where
explicitly provided under the terms of such plans or arrangements.
Notwithstanding the foregoing provisions, all Severance Benefits
provided hereunder shall be in addition to, and not in substitution
for, any pension rights under the any tax-qualified pension or
retirement plan in which Individual participates, and any
disability, workers’ compensation or other Company benefit
plan distribution that Individual is entitled to (other than
severance benefits), under the terms of any such plan as of the
Separation Date.
III.
Release . Individual, on behalf of himself, his
descendants, dependents, heirs, executors, administrators, assigns,
and successors, and each of them, hereby covenants not to sue and
fully releases and discharges the Company and each of its parents,
subsidiaries and affiliates, past and present, as well as its and
their trustees, directors, officers, members, managers, partners,
agents, attorneys, insurers, employees, stockholders,
representatives, assigns, and successors, past and present, and
each of them, hereinafter together and collectively referred to as
the " Releasees ," with respect to and from any and all
claims, wages, demands, rights, liens, agreements or contracts
(written or oral), covenants, actions, suits, causes of action,
obligations, debts, costs, expenses, attorneys’ fees,
damages, judgments, orders and liabilities of whatever kind or
nature in law, equity or otherwise, whether now known or unknown,
suspected or unsuspected, and whether or not concealed or hidden
(each, a " Claim "), which he now owns or holds or he has at
any time heretofore owned or held or may in the future hold as
against any of said Releasees (including, without limitation, any
Claim arising out of or in any way connected with
Individual’s service as an officer, director, employee,
member or manager of any Releasee, Individual’s separation
from her position as an officer, director, employee, manager and/or
member, as applicable, of any Releasee, or any other transactions,
occurrences, acts or omissions or any loss, damage or injury
whatever), whether known or unknown, suspected or unsuspected,
resulting from any act or omission by or on the part of said
Releasees, or any of them, committed or omitted prior to the date
of this Release Agreement including, without limiting the
generality of the foregoing, any Claim under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act of
1967, the Americans with Disabilities Act, the Family and Medical
Leave Act of 1993, the California Fair Employment and Housing Act,
the California Family Rights Act, or any other federal, state or
local law, regulation, or ordinance, or any Claim
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for severance pay, bonus, sick leave, holiday pay, vacation pay,
life insurance, health or medical insurance or any other fringe
benefit, workers’ compensation or disability (the "
Release "); provided, however, that the foregoing release
does not apply to any obligation of the Company to Individual
pursuant to any of the following: (1) any equity-based awards
previously granted by the Company to Individual, to the extent that
such awards continue after the termination of Individual’s
employment with the Company in accordance with the applicable terms
of such awards (and subject to any limited period in which to
exercise such awards following such termination of employment);
(2) any right to indemnification that Individual may have
pursuant to the Bylaws of the Company, its Articles of
Incorporation or under any written indemnification agreement with
the Company (or any corresponding provision of any subsidiary or
affiliate of the Company) or applicable state law with respect to
any loss, damages or expenses (including but not limited to
attorneys’ fees to the extent otherwise provided) that
Individual may in the future incur with respect to her service as
an employee, officer or director of the Company or any of its
subsidiaries or affiliates; (3) with respect to any rights
that Individual may have to insurance coverage for such losses,
damages or expenses under any Company (or subsidiary or affiliate)
directors and officers liability insurance policy; (4) any
rights to continued medical or dental coverage that Individual may
have under COBRA; (5) any rights to payment of benefits that
Individual may have under a retirement plan sponsored or maintained
by the Company that is intended to qualify under Section 401(a) of
the Internal Revenue Code of 1986, as amended;
(6) Individual’s benefit under and in accordance with
the terms and conditions of the Company’s Executive Deferred
Compensation Plan; or (7) any rights or benefits that
Individual has under this Separation Agreement. In addition, this
Release does not cover any Claim that cannot be so released as a
matter of applicable law. Individual acknowledges and agrees that
he has received any and all leave and other benefits that he has
been and is entitled to pursuant to the Family and Medical Leave
Act of 1993.
IV.
1542 Waiver . It is the intention of Individual in
executing this Separation Agreement that the same shall be
effective as a bar to each and every Claim hereinabove specified.
In furtherance of this intention, Individual hereby expressly
waives any and all rights and benefits conferred upon her by the
provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE and
expressly consents that this Separation Agreement (including,
without limitation, the Release set forth above) shall be given
full force and effect according to each and all of its express
terms and provisions, including those related to unknown and
unsuspected Claims, if any, as well as those relating to any other
Claims hereinabove specified. SECTION 1542 provides:
"A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE
MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR."
Individual acknowledges that he may hereafter discover Claims or
facts in addition to or different from those which Individual now
knows or believes to exist with respect to the subject matter of
this Separation Agreement and which, if known or suspected at the
time of executing this Separation Agreement, may have materially
affected this settlement. Nevertheless,
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Individual hereby waives any right, Claim or cause of action
that might arise as a result of such different or additional Claims
or facts. Individual acknowledges that he understands the
significance and consequences of the foregoing Release and such
specific waiver of SECTION 1542.
V.
ADEA Waiver . Individual expressly acknowledges and
agrees that by entering into this Separation Agreement, he is
waiving any and all rights or claims that he may have arising under
the Age Discrimination in Employment Act of 1967, as amended ("
ADEA "), which have arisen on or before the date of
execution of this Separation Agreement. Individual further
expressly acknowledges and agrees that:
(a) In
return for this Separation Agreement, he will receive consideration
beyond that which he was already entitled to receive before
entering into this Separation Agreement;
(b) He
is hereby advised in writing by this Separation Agreement to
consult with an attorney before signing this Separation Agreement;
(c) He
has voluntarily chosen to enter into this Separation Agreement and
has not been forced or pressured in any way to sign it;
(d) He
was given a copy of this Separation Agreement on December 9,
2008 and informed that he had forty-five (45) days within
which to consider the Separation Agreement and that if he wished to
execute this Separation Agreement prior to expiration of such
45-day period, he should execute the Acknowledgement and Waiver
attached hereto as Exhibit A ;
(e) Nothing
in this Separation Agreement prevents or precludes Individual from
challenging or seeking a determination in
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