Exhibit 10.3
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement (the "Agreement") executed
on the 16th day of August, 2006, sets forth the terms of the agreement
between Cognitronics Corporation ("Cognitronics" or the "Company") and
Xxxxx X. Xxxxxx ("Executive") relating to the termination of
Executive's employment with Cognitronics. This Agreement shall take
effect on the eighth day following the date upon which Executive
executes this Agreement (the "Effective Date").
WHEREAS, Executive has been employed as the President, Chief
Executive Officer and a Director of Cognitronics; and
WHEREAS, Cognitronics and Executive have agreed that Executive
will resign as President and Chief Executive Officer and a Director,
and will terminate his employment as of August 16, 2006 (the
"Termination Date") and pursuant to the terms of this Agreement as set
forth below; and
WHEREAS, the parties wish to resolve certain other matters and
provide for certain post-termination consulting services by Executive
as set forth herein.
NOW THEREFORE, in consideration of the mutual promises of the
parties and other valuable and sufficient consideration, the receipt
of which is hereby acknowledged, the parties hereto agree as follows:
1. Tender of Resignation
Executive is hereby resigning his positions as President and
Chief Executive Officer of Cognitronics and as a member of the Board
of Directors of Cognitronics, in each case effective as of the
Termination Date. Executive hereby irrevocably tenders, and
Cognitronics hereby accepts, Executive's written resignations from
such offices and directorship, and all officer and director positions
with Cognitronics' subsidiaries effective at the close of business on
the Termination Date.
2. Severance Payments/Compensation
(a) Cognitronics shall continue to pay Executive all amounts
due pursuant to his employment through the Termination Date.
(b) In consideration of the release and such other
consideration provided herein, Cognitronics shall:
(i) pay to Executive as severance pay the sum of Three
Hundred Thirty-Six Thousand Dollars ($336,000), less any
applicable Federal, State or local withholding taxes;
(ii) for a period of twelve (12) months following the
Termination Date, arrange to provide Executive with payment of
such amounts under COBRA as are required to maintain existing
health insurance (including dental insurance) coverage (less
amounts payable by Executive had he remained employed by
Cognitronics); provided, however, that as of the Termination
Date, Executive will no longer be deemed to be an "employee" for
purposes of any qualified pension plan, any other qualified or
non-qualified retirement plan, any stock option or other equity
incentive compensation arrangement or any successor plans
thereto;
(iii) pay to Executive the sum of Twenty-Nine Thousand Seven
Hundred Twenty-Three Dollars and Thirteen Cents ($29,723.13),
less any applicable Federal, State or local withholding taxes,
representing accrued vacation pay and all other unpaid amounts
(if any) to which Executive is entitled as of the Termination
Date under any compensation or bonus plan of Cognitronics;
(iv) pay to the Executive the sum of Twenty-Five Thousand
Dollars ($25,000), less any applicable Federal, State or local
withholding taxes, in lieu of Company life insurance and other
expenses; and
(v) reimburse the Executive for his reasonable and
documented legal and accounting fees in connection with the
negotiation of this Agreement in an aggregate amount not to
exceed Ten Thousand Dollars ($10,000);
(such amounts, collectively, the "Severance Payments"). The Severance
Payments set forth in clauses (i), (iii) and (iv) above shall be paid
on the Effective Date or the next business day thereafter. The
Severance Payments set forth in clause (v) above shall be paid
promptly following delivery of invoices for the applicable services.
(c) Cognitronics shall reimburse Executive for any unreimbursed
business expenses incurred by Executive on behalf of Cognitronics in
accordance with Cognitronics' normal reimbursement practices.
(d) No amounts payable to Executive pursuant to this Section 2
shall be subject to offset due to Executive obtaining employment with
a third party after the Termination Date. Executive shall not be
obligated to mitigate the amounts payable hereunder by seeking
employment with a third party after the Termination Date.
3. Leased Vehicle
Executive shall return his leased Mercedes automobile and the
keys thereto to the possession of Cognitronics not later than ninety
days after the Termination Date (the "Return Date"). The Company
shall provide Executive with continued use of such leased automobile
and shall continue to pay the lease costs (including insurance and
maintenance costs) for such automobile until the Return Date.
4. Termination of Executive Severance Agreement/Survival of Certain
Covenants
Except as provided in the next sentence, the Executive Severance
Agreement between Cognitronics and Executive dated as of October 16,
1995, as amended (the "1995 Severance Agreement"), is terminated as of
the Termination Date and shall be of no further force or effect.
Notwithstanding the foregoing: (i) the covenants set forth in
paragraph 5 of the 1995 Severance Agreement (which relate to
Executive's duty to keep certain information of Cognitronics
confidential) shall remain in effect indefinitely and (ii) the
covenants set forth in paragraphs 6 and 7 of the 1995 Severance
Agreement (which relate to Executive's duties with respect to
inventions and discoveries and the parties' respective obligations
with respect to nondisparagement) shall remain in effect for the
periods contemplated in such paragraphs.
All Severance Payments and other benefits payable under this
Agreement (but not any vested pension or supplemental pension
benefits) shall be forfeitable and shall be discontinued in the event
that an arbitrator appointed by the American Arbitration Association
determines that, after the date of this Agreement, Executive breached
or failed to perform his obligations under this Section 4 or willfully
engaged in conduct which was materially injurious to Cognitronics,
monetarily or otherwise.
5. Options/Restricted Stock
(a) The stock options granted by Cognitronics to Executive are
set forth below in the chart in subparagraph 5(b) of this Agreement
(the "Options"). Notwithstanding the vesting schedules provided with
respect to the Options, all of such Options shall be deemed fully
vested on the Termination Date. Executive shall have two years after
the Termination Date within which to exercise the Options, after which
time the Options shall terminate.
(b) The parties acknowledge that as of immediately prior to the
Termination Date, Executive held the following Options which were
vested as set forth below:
Title of
Security
Date of
Grant
No. of
Shares
Exercise
Price
Vesting
Status
Option
5/24/200
0
67,500
$9.06
(1)
Option
6/13/200
1
75,000
$5.00
(1)
Option
10/23/20
02
60,000
$1.55
(1)
Option
10/24/20
03
60,000
$2.20
(1)
Option
10/25/20
05
80,000
$2.70
(2)
(1) Fully vested.
(2) One-third vested.
(c) Executive also holds 62,550 shares of unvested restricted
Cognitronics common stock (the "Restricted Stock"). The restrictions
on such Restricted Stock shall be immediately removed as of the
Termination Date and the certificates for such Restricted Stock shall
be provided to Executive on or prior to the Effective Date.
6. Repayment of Loan
Executive entered into promissory notes payable to Cognitronics
(the "Notes"). As of the date of this Agreement, the aggregate
principal and accrued interest on such Notes owed by Executive to
Cognitronics is $524,133.27. Promptly following execution of this
Agreement, but not later than the Effective Date, Executive shall
deliver to Cognitronics as payment in full with respect to the Notes,
259,472 shares of unrestricted common stock of Cognitronics (with a
value of $2.02 per share, representing the closing price of a share of
Cognitronics common stock on the American Stock Exchange on the date
immediately prior to the date of this Agreement) properly endorsed to
Cognitronics.
7. Consulting Services
For a period of twelve (12) months following the Termination Date
(the "Consulting Period"), Executive shall provide the Company with
consulting services with respect to sales and marketing of the
Company's CX product line, as reasonably requested by the Chief
Executive Officer of the Company (but not to exceed five days per
month) (the "Services"). In consideration for such Services,
Executive shall receive a consulting fee payable monthly equal to five
percent (5%) of any revenues received by the Company as a result of
new orders of the Company's CX product line ("Qualified Sales") for
such month during the Consulting Period. For avoidance of doubt, (i)
maintenance sales shall not constitute Qualified Sales and (ii)
commissions hereunder shall be earned on the basis of orders placed
during the Consulting Period, but commissions shall be paid only upon
actual collection of revenues by the Company (which collections and
payments may take place in months following the date of the applicable
order or after the Consulting Period). The Company shall provide the
Executive with a monthly report of Qualified Sales and collections
thereon and the Executive shall have the right to audit such reports
upon reasonable prior written notice to the Company. In order to
provide the Services, during the Consulting Period the Executive shall
have continued access to his Company voicemail and email and shall be
provided reasonable secretarial assistance (not to exceed one hour per
week) to the extent such resources are available. In connection with
providing the Services during the Consulting Period, the Executive
shall have access to Company sales personnel.
8. Executive Release of Cognitronics
(a) Executive, on his own behalf and on behalf of his heirs,
successors and assigns (hereafter collectively referred to as the
"Executive Group"), hereby releases and forever discharges Cognitronics,
its predecessors, successors, corporate affiliates, and their current
and former agents, representatives, shareholders, directors, officers,
and employees (Cognitronics and such other persons and entities are
individually and collectively referred to hereafter as the "Cognitronics
Group"), from any and all claims, counterclaims, demands, debts,
actions, causes of action, suits or liabilities of any nature
whatsoever, whether known or unknown, which the Executive Group ever
had, now has or hereafter can, shall or may have against the
Cognitronics Group, for, upon, or by reason of any matter, cause or
thing whatsoever arising from the beginning of the world to the day of
this Agreement, including, but not limited to, (1) any statutory or
common law claims relating to Executive's employment and the termination
of Executive's employment; and (2) any claims relating to the 1995
Severance Agreement. In addition to all other statutory and common law
claims being released herein, the Executive Group is also releasing
claims arising out of the Federal Age Discrimination in Employment Act,
The Civil Rights Act of 1964, the Civil Rights Act of 1991, the Civil
Rights Act of 1866, the Connecticut Human Rights and Opportunities Law,
the Employee Retirement Income Security Act of 1974, the Americans With
Disabilities Act of 1992 and claims relating to the Connecticut wage
laws. Notwithstanding the releases set forth in the foregoing Section
8(a), the Executive Group shall in no way be deemed to have released any
claim with respect to: (I) breaches of this Agreement by Cognitronics,
(II) vested benefits under any employee welfare plan, including without
limitation, pension, supplemental pension, health and welfare plans,
(III) any rights to indemnification under applicable statutes, bylaws or
contracts which existed prior to the date of this Agreement or as the
same may in the future be expanded, and (IV) rights under workmen's
compensation plans and HIPPA (Health Insurance Protection Portability
Act).
(b) Executive has been advised to consult independent legal
counsel before signing this Agreement and he acknowledges that he has
executed this Agreement after actually consulting with his counsel.
Executive further acknowledges that he had the opportunity to consider
the terms of this Agreement for at least twenty-one (21) days.
Executive further represents and warrants that he has read this
Agreement carefully, that he has discussed this Agreement with his
attorney, that he fully understands the terms of this Agreement, and
that he has had sufficient time within which to consider the terms of
this Agreement. He represents and warrants that he is signing this
Agreement voluntarily.
(c) Executive represents and warrants that the Severance Payments
constitute consideration for this Agreement. Executive represents that
no other inducements have been offered to Executive by Cognitronics
other than the consideration set forth in this Agreement, and that the
consideration set forth herein represents consideration to which he
would not otherwise be entitled but for his execution of this Agreement.
(d) This Agreement shall not become effective until the eighth
day following the day on which Executive signed it, and Executive may,
at any time prior to the Effective Date, revoke this Agreement by giving
notice of revocation to Cognitronics. Such revocation of this Agreement
shall operate to revoke any consideration paid by Cognitronics to
Executive pursuant to this Agreement.
9. Cognitronics Release of Executive
The Cognitronics Group hereby releases and forever discharges the
Executive Group from any and all claims, counterclaims, demands, debts,
actions, causes of action, suits or liabilities of any nature
whatsoever, whether known or unknown, which the Cognitronics Group ever
had, now has or hereafter can, shall or may have against the Executive
Group, for, upon, or by reason of any matter, cause or thing whatsoever
arising from the beginning of the world to the day of this Agreement,
including, but not limited to, any statutory or common law claims
relating to Executive's employment and the termination of Executive's
employment. Notwithstanding the releases set forth in this Section 9,
the Cognitronics Group shall in no way be deemed to have released any
claim with respect to breaches of this Agreement (generally or to the
extent such breach relates to the other surviving agreements referenced
herein) by Executive.
10. Notice
Any notice or other communication under this Agreement shall be
in writing and shall be deemed to have been given when delivered
personally against receipt therefor; one day after being sent by
Federal Express or other overnight delivery service; or three days
after being mailed registered or certified mail, postage prepaid,
return receipt requested, to either party at the following addresses:
to Cognitronics, 0 Xxxxxxxxx Xxxxx, Xxxxxxx, XX 00000, Attention:
Chairman of the Board; to Executive, 00 Xxxx Xxxxx Xxxx, Xxx Xxxxxx,
XX 00000; or at such other address as such party shall give by notice
hereunder to the other party.
11. Governing Law
This Agreement shall be governed by, and construed in accordance
with and subject to the laws of the State of Connecticut applicable to
agreements made and to be performed entirely within such State without
regard to principles of conflicts of law.
12. Waivers and Amendments
This Agreement may be amended, modified, superseded, cancelled,
renewed or extended, and the terms and conditions hereof may be
waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power, or privilege hereunder, nor
any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
13. Entire Agreement
This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all
prior written or oral contracts and agreements.
14. Successors and Assigns/Assignment
Executive may not assign this Agreement. Cognitronics may,
without the consent of Executive, assign this Agreement and its rights
and obligations but only in connection with any sale, transfer or
other disposition of all or substantially all of its assets or
business, whether by merger, consolidation or otherwise, in which case
this Agreement shall become binding upon any successor in interest.
Cognitronics shall make best efforts to cause any successor in
interest to agree to assume the liabilities under this Agreement or
shall otherwise arrange for the satisfaction of the obligations set
forth herein.
15. Severability
The provisions of this Agreement are severable, and if any part
of it is found to be unenforceable, the other provisions shall remain
fully valid and enforceable.
16. Counterparts
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but both of which together shall
constitute one and the same instrument.
[signature page follows]
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first written above.
COGNITRONICS CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
--------------------
Name: Xxxxxxx Xxxxxxxx
Title: Treasurer
/s/ Xxxxx X. Xxxxxx
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XXXXX X. XXXXXX
