Exhibit 10.1

 

EXECUTION VERSION

 

CHURCHES SEPARATION AGREEMENT AND RELEASE

 

This Separation Agreement and Release (“Agreement”) is entered into this 3rd day
of March 2013, between Tuesday Morning Corporation, a Delaware corporation (“the
Company”), and Brady Churches (“Churches”).  Capitalized terms used and not
otherwise defined herein will have the meanings ascribed to such terms in the
Employment Agreement, dated September 1, 2012 (“Employment Agreement”) by and
between the Company and Churches.

 

WHEREAS Churches and the Company have reached an agreement that Churches’
employment with the Company will terminate on March 3, 2013 without Cause; and

 

WHEREAS Churches and the Company have reached an agreement with respect to
certain matters relating to his separation from the Company.

 

Now therefore, in return for good and valuable consideration, the delivery and
sufficiency of which Churches and the Company acknowledge, Churches and the
Company agree as follows:

 

1.             Release.  Churches agrees to execute the Release attached as
Exhibit A to this Agreement (“the Release”) within twenty-one days of the
effective date of this Agreement.  If Churches decides not to execute the
Release, or chooses to revoke his execution of the Release within seven days of
signing the Release, this Agreement will be null and void and neither Churches
nor the Company shall have any further obligation under it, regardless of any
other provision of this Agreement.  The Company agrees that Exhibit A is
satisfactory in form and substance within the meaning of the Employment
Agreement.

 

2.             Acceleration of Option Vesting.

 

(a)           The Company and Churches acknowledge and agree that the vesting
provisions of certain of the First Signing Options shall be amended to provide
as follows:

 

(i)            Section 6 of the First Signing ISO shall be deleted in its
entirety and replaced with the following:

 

6. Vesting of Option.  Subject to the provisions hereof and the provisions of
the Plan, 33,333 shares (at an exercise price of $5.56) of Common Stock subject
to the Option will vest as of March 3, 2013, but may not be exercised until
March 12, 2013.  No portion of the Option shall be exercisable in any event on
or after the tenth anniversary of the Grant Date (the “Option General Expiration
Date”); provided, however, that if Optionee is a ten percent (10%) shareholder
within the meaning of section 422(b)(6) of the Code on the Grant Date, an option
shall not be exercisable after the expiration of five years from the Grant
Date.  An option may not be exercised for a fraction of a share of Common Stock.

 

(ii)           Section 4 of the nonqualified stock option issued under the
Company’s 2008 Long-Term Equity Incentive Plan, that together with the First

 

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Signing ISO constituted part of the First Signing Options (the “First Signing
NSOs”) shall be deleted in its entirety and replaced with the following:

 

4. Vesting of Option.  Subject to the provisions hereof and the provisions of
the Plan, 300,000 shares (at an exercise price of $5.59) of Common Stock subject
to the Option will vest as of March 3, 2013, but may not be exercised until
March 12, 2013.  No portion of the Option shall be exercisable in any event on
or after the tenth anniversary of the Grant Date (the “Option General Expiration
Date”).  An option may not be exercised for a fraction of a share of Common
Stock.

 

(b)           The Company and Churches acknowledge and agree that the
termination provisions of each of the First Signing ISO and the First Signing
NSO shall be amended to provide as follows:

 

(i)            Section 8 of the First Signing ISO shall be deleted in its
entirety and replaced with the following:

 

8.  Termination of Option.  The Option, as amended, shall terminate and become
null and void on the Option General Expiration Date or, if Optionee revokes the
release delivered to the Company in connection with his separation from
employment pursuant to any separation agreement by and between the Optionee and
Company, on the date Optionee revokes the release.  Upon the death of Optionee
prior to the expiration of the Option, Optionee’s executors, administrators or
any person or persons to whom the Option may be transferred by will or by the
laws of descent and distribution, shall have the right, at any time prior to the
termination of the Option to exercise the Option with respect to the number of
shares that Optionee would have been entitled to exercise if he were still
alive. Any portion of the Option that may not vest pursuant to Section 6 is
forfeited and becomes null and void immediately upon Optionee’s termination of
employment.

 

(ii)           Section 6 of the First Signing NSO shall be deleted in its
entirety and replaced with the following:

 

6.  Termination of Option.  The Option, as amended, shall terminate and become
null and void on the Option General Expiration Date or, if Optionee revokes the
release delivered to the Company in connection with his separation from
employment pursuant to any separation agreement by and between the Optionee and
Company, on the date Optionee revokes the release.  Upon the death of Optionee
prior to the expiration of the Option, Optionee’s executors, administrators or
any person or persons to whom the Option may be transferred by will or by the
laws of descent and distribution, shall have the right, at any time prior to the
termination of the Option to exercise the Option with respect to the

 

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number of shares that Optionee would have been entitled to exercise if he were
still alive.

 

(c)           The Company and Churches acknowledge and agree that (i) the
balance of the shares covered under the First Signing ISO (covering 20,672
shares) shall not vest, (ii) the nonqualified stock option issued under the
Company’s 2004 Long-Term Equity Incentive Plan, that together with the First
Signing ISO and First Signing NSO constituted the First Signing Options
(covering 445,995 shares) shall terminate (unvested) and be of no further force
and effect, (iii) the Second Signing Options (covering 200,000 shares) shall
terminate (unvested) and be of no further force and effect; and (iv) the
restricted stock award dated November 7, 2012 granted by the Company to Churches
for 12,337 shares shall terminate and be of no further force or effect.

 

(d)           The Company and Churches acknowledges and agree that the
provisions of this Section 2 shall replace in its entirety Section 3(c) of the
Employment Agreement.

 

3.             Severance Payment.  The Company and Churches acknowledges and
agree that the Severance Payment pursuant to Section 4(b) of the Employment
Agreement shall be equal to nine hundred thousand dollars ($900,000) and shall
be payable in a cash lump sum on September 5, 2013, subject to customary
withholding deductions, to an account designated by Churches.

 

4.             Bonus Payment and Legal Fee Reimbursement.  The Company will pay
Churches an annual incentive bonus payment for the Company’s current fiscal year
in the amount of two hundred eighty-four thousand dollars ($284,000) (the
“Bonus”). The Bonus will be payable in a cash lump sum on the next regular
payroll payment date following March 3, 2013 in accordance with the Company’s
normal payroll practices and will be subject to customary withholding
deductions. The Company will also pay directly, or reimburse Churches and
Marketing Results Ltd., for up to a total of sixty thousand dollars ($60,000)
for legal and other third party fees incurred in connection with the negotiation
of his separation from the Company and negotiations regarding the possible
acquisition of Marketing Results, Ltd. upon receipt of invoices or other
documentation evidencing such fees. Reimbursements for legal and other third
party fees will be payable within 30 days of receipt of invoice or other
documentation evidencing such fees. In compliance with Section 409A (as defined
in the Employment Agreement), the amount of expenses eligible for reimbursement
during any calendar year shall not affect the amount of expenses eligible for
reimbursement in any other calendar year; the reimbursement of eligible expense
shall be made on or before December 31 of the calendar year following the
calendar year in which the expense was incurred; the reimbursement(s) shall not
be subject to liquidation or exchange for another benefit; and each
reimbursement payment shall be one of a series of separate payments (and each
shall be construed as a separately identified payment) for purposes of
Section 409A.

 

5.             Health Benefits. Churches shall be entitled to continue coverage
for Churches and his dependents under the Company’s group medical plan or group
dental plan (collectively, the “Group Health Plan”) under section 4980B of the
Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”), and the Company will reimburse Churches for the full amount of the
premiums Churches pays for the COBRA coverage under the Group Health Plan for up
to the first 12 months Churches maintains the COBRA coverage.  Any
reimbursements by the Company to Churches required under this Section 5 shall be
made on the

 

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last day of each month Executive pays the amount required for the COBRA
coverage, for up to the first 12 months of COBRA coverage.

 

6.             Other Agreements.  The Company and Churches hereby agree that
Section 6(a) of the Employment Agreement is hereby terminated and of no further
force and effect.  In addition, the Company hereby agrees that the termination
of the employment of Churches is without Cause. The Company represents and
agrees that the ownership and involvement of Churches with Marketing
Results, Ltd. did not breach Section 6(a) of the Employment Agreement, and
hereby releases and forever discharges Churches from any and all claims, suits,
controversies, actions, causes of action, cross-claims, counter-claims, demands,
debts, compensatory damages, liquidated damages, punitive or exemplary damages,
other damages, claims for costs and attorneys’ fees, or liabilities of any
nature whatsoever in law and in equity, both past and present and whether known
or unknown, suspected, or claimed against Churches under Section 6(a) of the
Employment Agreement arising from his ownership and other involvement with
Marketing Results, Ltd.

 

7.             Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and both of which taken
together constitute one and the same agreement.

 

8.             Choice of Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas (without regard to its
conflict of law rules).

 

9.             Entire Agreement.  This Agreement is the entire agreement between
the parties with respect to the subject matter hereof and supersedes any prior
understandings, agreements or representations by or between the parties on any
issue related to severance or the termination of the Parties’ relationship
supplemental to the Employment Agreement.  Notwithstanding the foregoing, the
parties acknowledge and agree that Sections 3(d), 5, 6(b), 6(c), 6(d) and 10-19
of the Employment Agreement shall continue in full force and effect

 

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In Witness Whereof, the parties have caused this Agreement to be executed on the
day and year set forth above.

 

 

 

/s/ Brady Churches

 

 

Brady Churches

 

 

 

 

 

 

 

 

TUESDAY MORNING CORPORATION

 

 

 

 

By:  

/s/ Meredith W. Bjorck

 

Printed Name:  

Meredith W. Bjorck

 

Title:  

SVP, General Counsel and Secretary

 

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EXHIBIT A

 

TUESDAY MORNING CORPORATION

 

Release

 

I,  Brady Churches, do hereby release and forever discharge as of the date
hereof (i) Tuesday Morning Corporation, a Delaware corporation, (the “Company”)
and all of its affiliates and (ii) all present and former directors, officers,
agents, representatives, employees, successors and assigns of the Company and
its affiliates (collectively, the “Released Parties”) to the extent provided
below.

 

(i)                                     I understand that my Employment
Agreement with the Company dated September 1, 2012 (the “Agreement”) includes
consideration for signing this Release and such consideration is not salary,
wages or benefits to which I was already entitled.  I also acknowledge and
represent that I have received all payments and benefits that I am entitled to
receive (as of the date hereof) by virtue of any employment by the Company,
other than the amounts to be paid as consideration for this Release under the
Agreement.

 

(ii)                                  Except as provided in paragraphs (iv) and
(xi) below, I knowingly and voluntarily (for myself, my heirs, executors,
administrators and assigns) release and forever discharge the Company and the
other Released Parties from any and all claims, suits, controversies, actions,
causes of action, cross-claims, counter-claims, demands, debts, compensatory
damages, liquidated damages, punitive or exemplary damages, other damages,
claims for costs and attorneys’ fees, or liabilities of any nature whatsoever in
law and in equity, both past and present (through the date this Release becomes
effective and enforceable) and whether known or unknown, suspected, or claimed
against the Company or any of the Released Parties which I, my spouse, or any of
my heirs, executors, administrators or assigns, may have, which arise out of or
are connected with my employment with, compensation by, or my separation or
termination from, the Company; Title VII of the Civil Rights Act of 1964, as
amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act
of 1967, as amended (including the Older Workers Benefit Protection Act); the
Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990;
the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and
Notification Act; the Employee Retirement Income Security Act of 1974; any
applicable Executive Order Programs; the Fair Labor Standards Act; or their
state or local counterparts; or under any other federal, state or local civil or
human rights law, or under any other local, state, or federal law, regulation or
ordinance; or under any public policy, contract or tort, or under common law; or
arising under any policies, practices or procedures of the Company; or any claim
for wrongful discharge, breach of contract, infliction of emotional distress,
defamation; or any claim for costs, fees, or other expenses, including
attorneys’ fees incurred in these matters (all of the foregoing collectively
referred to herein as the “Claims”).

 

(iii)                               I represent that I have made no assignment
or transfer of any right, claim, demand, cause of action, or other matter
covered by paragraph (ii) above.

 

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(iv)                              I agree that this Release does not waive or
release any rights or claims that I may have under the Age Discrimination in
Employment Act of 1967 which arise after the date I execute this Release. I
acknowledge and agree that my separation from employment with the Company in
compliance with the terms of the Agreement shall not serve as the basis for any
claim or action (including, without limitation, any claim under the Age
Discrimination in Employment Act of 1967).

 

(v)                                 I agree that I am waiving all rights to sue
or obtain equitable, remedial or punitive relief from any or all Released
Parties of any kind whatsoever, including, without limitation, reinstatement,
back pay, front pay, attorneys’ fees and any form of injunctive relief. 
Notwithstanding the above, I further acknowledge that I am not waiving and am
not being required to waive any right that cannot be waived under law, including
the right to file an administrative charge or participate in an administrative
investigation or proceeding; provided, however, that I disclaim and waive any
right to share or participate in any monetary award resulting from the
prosecution of such charge or investigation or proceeding.

 

(vi)                              In signing this Release, I acknowledge and
intend that it shall be effective as a bar to each and every one of the Claims
hereinabove mentioned or implied. I expressly consent that this Release shall be
given full force and effect according to each and all of its express terms and
provisions, including those relating to unknown and unsuspected Claims
(notwithstanding any state statute that expressly limits the effectiveness of a
release of unknown, unsuspected and unanticipated Claims), if any, as well as
those relating to any other Claims hereinabove mentioned or implied. I
acknowledge and agree that this waiver is an essential and material term of this
Release and that without such waiver the Company would not have agreed to the
terms of the Agreement.  I further agree that in the event I should bring a
Claim seeking damages against the Company, or in the event I should seek to
recover against the Company in any Claim brought by a governmental agency on my
behalf, this Release shall serve as a complete defense to such Claims to the
maximum extent permitted by law. I further agree that I am not aware of any
pending claim of the type described in paragraph (ii) as of the execution of
this Release.

 

(vii)                           I agree that neither this Release, nor the
furnishing of the consideration for this Release, shall be deemed or construed
at any time to be an admission by the Company, any Released Party or myself of
any improper or unlawful conduct.

 

(viii)                        I agree that I will forfeit all amounts payable by
the Company pursuant to the Agreement if I challenge the validity of this
Release. I also agree that if I violate this Release by suing the Company or the
other Released Parties, I will pay all costs and expenses of defending against
the suit incurred by the Released Parties, including reasonable attorneys’ fees,
and return all severance payments received by me pursuant to the Agreement.

 

(ix)                              I agree that as of the date hereof, I have
returned to the Company any and all memoranda, notes, plans, records, reports,
computer tapes, printouts and software and other documents and data (and copies
thereof) relating to Confidential

 

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Information (as defined in the Agreement) or the business of the Company or any
subsidiary, which I possess or have had under my control at any time.

 

(x)                                 Notwithstanding anything in this Release to
the contrary, this Release shall not relinquish, diminish, or in any way affect
any rights or claims arising out of (a) any breach by the Company or by any
Released Party of the Agreement after the date hereof, including, without
limitation, the payment of severance and provision of equity acceleration
thereunder, (b) my rights to indemnification under the Company’s charter, bylaws
and applicable law, for my acts and omissions while serving as an officer and
employee of the Company and, as applicable, to coverage under any contract of
officers and directors liability insurance, and (c) my rights to accrued and
vested benefits under each employee benefit plan of the Company in which I am a
participant immediately prior to my employment termination.  Notwithstanding
anything in this Release to the contrary, nothing herein shall release the
Company from its obligations under the Agreement or impair my right to enforce
the Agreement.

 

(xi)                              Whenever possible, each provision of this
Release shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Release is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Release shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

BY SIGNING THIS RELEASE, I REPRESENT AND AGREE THAT:

 

1.              I HAVE READ IT CAREFULLY;

 

2.              I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP
IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL
RIGHTS ACT OF 1964, AS AMENDED; THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH
DISABILITIES ACT OF 1990; AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED;

 

3.              I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

 

4.              I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING
IT AND I HAVE DONE SO OR, AFTER CAREFUL READING AND CONSIDERATION I HAVE CHOSEN
NOT TO DO SO OF MY OWN VOLITION;

 

5.              I HAVE HAD AT LEAST 21 DAYS FROM THE DATE OF MY RECEIPT OF THIS
RELEASE SUBSTANTIALLY IN ITS FINAL FORM ON FEBRUARY 28, 2013 TO CONSIDER IT;

 

6.              I UNDERSTAND THAT I HAVE SEVEN DAYS AFTER THE EXECUTION OF THIS
RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR
ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

 

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7.              I HAVE SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH
THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

 

8.              I AGREE THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED,
WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN
AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

 

 

DATE:

 

 

 

 

Brady Churches

 

 

 

 

DATE:

 

 

Tuesday Morning Corporation

 

 

 

 

 

 

 

By:

 

 

 

 

Its:

 

 

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