EMPLOYMENT TERMINATION AGREEMENT
Exhibit
10.2
EMPLOYMENT
TERMINATION
AGREEMENT
This
Employment Termination Agreement (“Agreement”) is entered into by and between
ClearOne Communications, Inc. (“ClearOne” or the “Company”) and Xxxxx X. Xxxxxx
(“Xxxxxx”) (ClearOne and Xxxxxx shall sometimes be hereinafter referred to
collectively as the “Parties”).
RECITALS
X. Xxxxxx
has been employed by ClearOne in a variety of positions, most recently as the
Company’s Chief Financial Officer.
B. On
January 15, 2003, the United States Securities and Exchange Commission
filed a civil action against ClearOne, Xxxxxx, and Xxxxxxx X. Xxxxx, who was
then serving as the Company’s Chief Executive Officer, alleging various
improprieties and misstatements in connection with the Company’s financial
statements (the “SEC Action”).
C. The
filing of the SEC Action has spawned, and may continue to spawn, multiple
related proceedings, including, but not limited to, multiple shareholder
securities class actions, multiple shareholder derivative actions, a grand
jury
investigation being conducted by the United States Department of Justice, a
dispute and potential litigation between the Company and its directors and
officers liability insurers, and potential litigation between the Company and
its former auditor, Ernst & Young (collectively, “Related
Proceedings”).
D. Soon
after the filing of the SEC Action, the Company placed Xxxxxx on a paid
administrative leave of absence, and this paid administrative leave has
continued in effect at all times up to the execution of this
Agreement.
X. Xxxxxx
has employed separate counsel, Milo Xxxxxx Xxxxxxx and the law firm of
Bendinger, Crockett, Xxxxxxxx & Xxxxx, PC (collectively, “BCP&C”), to
defend her in the SEC Action and the Related Proceedings. BCP&C has also
represented Xxxxxx in connection with the negotiation and drafting of this
Agreement.
X. Xxxxxx
has made various demands on the Company for indemnification and for advancement
of the attorneys’ fees and costs she has incurred to date, as well as the
attorneys’ fees and costs she may subsequently incur, in connection with the SEC
Action and the Related Proceedings and has provided the Company with written
undertakings, dated August 29, 2003 and September 3, 2003, in
conformity with the requirements of Utah Code Xxx.
§ 16-10a-904.
G. ClearOne
referred Xxxxxx’x demands for indemnification to its Special Litigation
Committee (“SLC”) comprised of two independent directors. The SLC reviewed those
demands, as well as similar demands for indemnification made by other present
or
former officers and directors of the Company, in conjunction with its
investigation of the various claims asserted in the multiple shareholder
derivative actions filed against certain of the Company’s present and former
officers and directors, including Xxxxxx. On October 13, 2003, the SLC
completed its investigation concerning the derivative actions and the
indemnification demands and issued its reports
to the Company wherein it concluded, inter alia,
that
pursuing the derivative actions was not in the best interest of the Company
and
that the Company should attempt to negotiate a settlement of Xxxxxx’x
indemnification demands in the context of negotiating a global settlement of
all
potential claims and counterclaims between the Company and Xxxxxx. In reliance
on the SLC’s conclusions and recommendations, the Company has moved to dismiss
the derivative actions pursuant to Utah Code Xxx. § 16-10a-740(4)(a) and
has negotiated this Agreement with Xxxxxx.
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X. Xxxxxx
and ClearOne desire to resolve any and all disputes that may exist between
them,
whether known or unknown, including, but not limited to, disputes regarding
Xxxxxx’x demand for indemnification, disputes relating to Xxxxxx’x employment
with ClearOne, and disputes relating to the termination of that employment
relationship.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual promises, covenants, warranties,
and
agreements set forth herein, the Parties mutually agree as follows:
1. Effective
Date.
This
Agreement is effective on the eighth day following Xxxxxx’x signing of this
Agreement, provided that Xxxxxx does not revoke her execution of this Agreement
as provided in Paragraph 19 below.
2. Receipt
of this Agreement.
Xxxxxx
acknowledges that she received a copy of this Agreement on December 2,
2003, and that she has 21 days from the receipt of this Agreement in which
to
consider and consult with an attorney regarding this Agreement. Xxxxxx further
acknowledges that she has had an adequate amount of time in which to consult
with BCP&C, her counsel of choice, with respect to the contents of this
Agreement prior to signing.
3. Payment
to Xxxxxx.
Upon
the expiration of the revocation period described in Paragraph 19 below and
the unrevoked signing of this Agreement by Xxxxxx, ClearOne shall pay Xxxxxx
the
sum of $75,000. The Parties acknowledge and agree that this payment is being
made in consideration of, inter alia,
the
Company’s purchase of Xxxxxx’x shares of the Company’s common stock, the
Company’s cancellation of Xxxxxx’x options to purchase additional shares of the
Company’s common stock, and the release of all claims that Xxxxxx may have
against the Company, all as more fully stated in Paragraphs 5, 6, and 9
below. The Parties also acknowledge and agree that the Company is not
responsible for the withholding of any federal or state taxes from said payment
and that Xxxxxx is responsible for paying any taxes that may become due and
owing as a result of her receipt of said payment.
4. Resignation
of Employment.
Xxxxxx
hereby resigns her employment with ClearOne effective December 5,
2003.
5. Cancellation
of Stock Options.
As
partial consideration for the payment specified in Paragraph 3 above, upon
the expiration of the revocation period described in Paragraph 19 below and
the unrevoked signing of this Agreement by Xxxxxx, all unexercised stock options
acquired by Xxxxxx during her employment with the Company, whether vested or
unvested, shall immediately
be deemed cancelled. Xxxxxx represents and warrants that, immediately prior
to
the effective date of this Agreement, she holds vested and unvested stock
options entitling her to purchase up to a total of 268,464 shares of the
Company’s common stock and that 171,963 of these options are vested. Xxxxxx
further agrees that all of her rights, entitlements, and benefits under the
1990
Xxxxxxx Stock Option Plan and the 1998 ClearOne Stock Option Plan, including
any
agreements entered into in relation to the foregoing plans, are hereby
terminated and cancelled.
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6. Transfer
of Stock.
As
partial consideration for the payment specified in Paragraph 3 above, upon
the expiration of the revocation period described in Paragraph 19 below and
the unrevoked signing of this Agreement by Xxxxxx, Xxxxxx shall transfer,
assign, and sell to the Company 15,500 shares of the Company’s common
stock.
7. Cooperation
in Related Proceedings.
Xxxxxx
shall cooperate with the Company and its counsel in the defense and/or
prosecution of the SEC Action and the Related Proceedings. Xxxxxx’x cooperation
shall include, but shall not be limited to, voluntarily providing deposition
and
trial testimony, meeting with the Company and its counsel for the purpose of
preparing for depositions or trial proceedings, and providing information and
documents to the Company or its counsel in connection with the defense and/or
prosecution of the SEC Action and the Related Proceedings. With respect to
any
request by the Company and/or its counsel for deposition or trial testimony,
meetings, information, or documents, the Company shall give reasonable notice
to
Xxxxxx of its request, including the time and place of the deposition, trial,
or
meeting, and shall reimburse Xxxxxx for all reasonable expenses incurred by
her,
including reasonable attorneys’ fees and costs, in providing the requested
cooperation.
8. Indemnification.
Subject
to the limitations imposed by Utah Code Xxx. § 16-10a-902 and the Company’s
articles of incorporation and bylaws, and also subject to the undertakings
referred to in Recital F above, ClearOne shall indemnify Xxxxxx for any
liability and for all reasonable attorneys’ fees and costs incurred by her in
connection with the SEC Action or any Related Proceedings, whether incurred
before or after the effective date of this Agreement. The Company’s duty to
indemnify Xxxxxx is further conditioned upon Xxxxxx’x fulfillment of her duty
under Paragraph 7 above to cooperate with the Company and its counsel in
connection with the SEC Action and Related Proceedings.
9. Release
of Claims by Xxxxxx.
Xxxxxx,
on behalf of herself and her heirs and assigns, hereby completely releases
and
discharges ClearOne and all of ClearOne’s predecessors, successors, parents,
subsidiaries, and affiliates, and all of their respective present and former
directors, officers, employees, attorneys and agents (hereinafter collectively
referred to as “Releasees”) from any and all existing claims and causes of
action of every kind and nature, whether presently known or unknown by the
Parties, including but not limited to any claims or causes of action for breach
of implied or express contract, libel, slander, wrongful discharge or
termination, discrimination claims under the Age Discrimination in Employment
Act and/or Older Workers Benefit Protection Act, Title VII of the Civil Rights
Act of 1964, as amended, the Utah Antidiscrimination Act, local laws prohibiting
age, race, religion, sex, national origin, disability and other forms of
discrimination, or any other federal or state law that may be applicable
thereto, claims growing out of any legal restrictions on ClearOne’s right to
terminate its
employees, any tort claim or other claim arising in any way out of the
employment relationship between Xxxxxx and ClearOne or the termination of that
relationship. Xxxxxx specifically waives any and all claims for back pay, front
pay, or any other form of compensation for services, except as set forth
herein.
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Except
as
expressly stated in Paragraph 8 above, Xxxxxx hereby waives any right to
recover damages, costs, attorneys’ fees, and any other relief in any proceeding
or action brought against ClearOne by any other party, including without
limitation the Equal Employment Opportunity Commission and the Utah
Antidiscrimination and Labor Division, on Xxxxxx’x behalf asserting any claim,
charge, demand, grievance, or cause of action released by Xxxxxx as stated
above.
Notwithstanding
the foregoing, Xxxxxx does not waive rights, if any, Xxxxxx may have to
unemployment insurance benefits or workers’ compensation benefits. Nothing in
this Paragraph 9 prohibits Xxxxxx from paying COBRA premiums to maintain
Xxxxxx’x participation, if any, in ClearOne’s group health plan to the extent
allowed by law and by the terms, conditions, and limitations of the health
plan.
10. Release
of Claims by ClearOne.
Except
for any claim as to which indemnification is not allowed by Utah Code Xxx.
§ 16-10a-902 and any claim that may accrue under the undertakings
referenced in Recital F above, ClearOne, on behalf of itself and its successors
and assigns, hereby completely releases and discharges Xxxxxx from all existing
claims and causes of action of any kind and nature, whether presently known
or
unknown by the Parties, including but not limited to any claims or causes of
action arising out of or relating to Xxxxxx’x employment with
ClearOne.
11. No
Assignment of Claims.
Xxxxxx
represents and warrants that she has not previously assigned or transferred,
or
attempted to assign or transfer, to any third party, any of the claims waived
and released herein.
12. No
Claim Filed.
Xxxxxx
represents that she has not filed any claim, complaint, charge, or lawsuit
against ClearOne or any other Releasee with any governmental agency or any
state
or federal court, and covenants not to file any lawsuit at any time hereafter
for any matter, claim, or incident known or unknown which occurred or arose
out
of occurrences prior to the date hereof.
13. No
Admission of Liability.
This
Agreement does not constitute an admission of any fault, liability, or
wrongdoing by any Releasee, nor an admission that Xxxxxx has any claim
whatsoever against ClearOne or any other Releasee. ClearOne and all other
Releasees specifically deny having any liability to Xxxxxx or having committed
any wrongful acts against Xxxxxx. This Agreement does not constitute an
admission of any fault, liability, or wrongdoing by Xxxxxx, nor an admission
that ClearOne has any claim against Xxxxxx. Xxxxxx specifically denies having
any liability to ClearOne or having committed any wrongful acts against
ClearOne.
14. Additional
Consideration.
Xxxxxx
acknowledges and agrees that as of the date she signs this Agreement, ClearOne
has paid to Xxxxxx (a) all compensation for wages earned, less normal
payroll deductions, (b) all amounts due for earned vacation pay less normal
payroll deductions, and (c) all other amounts due and owing to Xxxxxx by
ClearOne. Xxxxxx agrees and acknowledges that the sums paid pursuant to this
Agreement are in addition to any sums or payments to which Xxxxxx would be
entitled but for the signing of this Agreement.
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15. Conditions
Subsequent.
This
Agreement is conditioned upon Xxxxxx signing settlement documents in the SEC
Action by December 5, 2003, and upon the final approval of the settlement
of the SEC Action, as it applies to Xxxxxx, by January 31, 2004. If for any
reason Xxxxxx fails to satisfy either of these conditions, this Agreement will
automatically become null and void, and the Parties shall forthwith return
to
each other any and all consideration received by them pursuant to this
Agreement.
16. Integration
Clause.
This
Agreement contains the entire agreement and understanding of ClearOne and Xxxxxx
concerning the subject matter hereof, and except as expressly noted herein,
this
Agreement supersedes and replaces all prior negotiations, proposed agreements,
agreements or representations whether written or oral concerning the subject
matter hereof. ClearOne and Xxxxxx agree and acknowledge that neither ClearOne
or Xxxxxx, nor any agent or attorney of either, has made any representation,
warranty, promise or covenant whatsoever, express or implied, not contained
in
this Agreement, to induce the other to execute this Agreement. No amendment,
alteration, or modification of this Agreement shall be effective unless made
in
writing and signed by both Parties.
17. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Utah, without giving effect to Utah’s choice of law rules.
18. Voluntary
and Knowing Signing.
Xxxxxx
acknowledges that she has read this Agreement carefully and fully understands
this Agreement and that she has consulted with her attorney, BCP&C, prior to
signing this Agreement. Xxxxxx acknowledges that she has executed this Agreement
voluntarily and of her own free will and that she is knowingly and voluntarily
releasing and waiving all claims she may have against Releasees, including
ClearOne.
19. Revocation
Period.
Xxxxxx
has seven (7) days from the date on which she signs this Agreement to revoke
this Agreement by providing written notice, by mail, hand delivery, or
facsimile, of her revocation to:
Xxxxxxx
X. Xxxxxxxxxx
Xxxxxxx
Xxxxx & Xxxxxxx
Counsel
for ClearOne
000
Xxxxx
Xxxx Xxxxxx
Xxxxx
0000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Facsimile:
(000) 000-0000
Xxxxxx’x
revocation, to be effective, must be received by the above-named person by
the
end of the seventh day after Xxxxxx signs this Agreement. This Agreement becomes
effective on the eighth day after Xxxxxx signs this Agreement, providing that
Xxxxxx has not revoked this Agreement as provided above.
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IN
WITNESS WHEREOF, the Parties have executed this Agreement on the dates indicated
below.
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Dated:
December 5, 2003
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CLEARONE
COMMUNICATIONS, INC.
/s/
Xxxx Xxxxxx
By:
Xxxx Xxxxxx
Its:
CEO
|
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Dated:
December 2, 2003
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/s/
Xxxxx Xxxxxx
Xxxxx
Xxxxxx
XXXXX
X. XXXXXX
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