SEPARATION AGREEMENT
EXHIBIT
10.1
This
Separation Agreement (this “Agreement”)
is
made and entered into as of the [__] day of [__________], 2006, by and between
Electronic Clearing House, Inc., a Nevada corporation (the “Company”)
and
[____________] (“Executive”).
RECITALS
WHEREAS,
Executive is employed by the Company as the [___________] of the Company;
and
WHEREAS,
the Company considers it essential to its best interests and to the best
interests of its stockholders to xxxxxx the continuous employment of its
key
personnel.
NOW,
THEREFORE, in consideration of the mutual covenants and promises herein
contained and other good and valuable consideration, receipt and sufficiency
of
which are hereby acknowledged, the parties hereby agree as follows:
1. Definitions.
a. “Anticipated
Annual Bonus”
shall
mean the highest possible annual bonus award to be received by Executive
in a
given fiscal year based upon and assuming the successful completion by each
of
the Company and Executive, as applicable, of performance criteria previously
determined by the Board of Directors of the Company for such fiscal
year.
b. “Change-in-Control”
shall
mean the consummation of (i) a merger or consolidation of the Company with
or
into another entity or any other corporate reorganization, if more than 50%
of
the combined voting power (which voting power shall be calculated by assuming
the conversion of all equity securities convertible (immediately or at some
future time) into shares entitled to vote, but not assuming the exercise
of any
warrant or right to subscribe to or purchase those shares) of the continuing
or
surviving entity’s securities outstanding immediately after such merger,
consolidation or other reorganization is owned, directly or indirectly, by
persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization; provided,
however,
that in
making the determination of ownership by the stockholders of the Company,
immediately after the reorganization, equity securities which persons own
immediately before the reorganization as stockholders of another party to
the
transaction shall be disregarded; or (ii) the sale, transfer or other
disposition of all or substantially all of the Company’s assets.
c. “Common
Stock”
means
the common stock, $.01 par value of the Company.
d. “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended. References to a particular
section of the Exchange Act include references to successor
provisions.
e. “Involuntary
Termination”
shall
mean Executive's cessation of the provision of services following (i)
a
material reduction in Executive's function, authority, duties, or
responsibilities, without Executive's express written consent; or (ii) a
material reduction in salary.
f. “Options”
shall
mean options issued by the Company to the Executive to purchase Common Stock
pursuant to the Company's Amended and Restated 2003 Incentive Stock Option
Plan.
g. “Restricted
Stock”
shall
mean shares of Common Stock acquired by Executive pursuant to, or outside
of,
the Company's Amended and Restated 2003 Incentive Stock Option Plan.
h. “Sales
Commission Plan”
shall
mean a plan setting forth, for a given fiscal year, sales commission
compensation payable to Executive based on performance criteria previously
determined by the Board of Directors of the Company for such fiscal
year.
i. “Subsidiary”
means
(a) any corporation of which more than 50% of the Voting Securities are at
the
time, directly or indirectly, owned by the Company, (b) any partnership or
limited liability company in which the Company has a direct or indirect interest
(whether in the form of voting power or participation in profits or capital
contribution) of more than 50%, and (c) any other entity designated by the
Board
of Directors of the Company (“Board”)
in
which the Company has a direct or indirect interest.
j. “Termination
Date”
shall
mean the date in which Executive (i) is terminated by the Company without
Cause,
or (ii) ceases to provide services to the Company as a result of an Involuntary
Termination with respect to Executive.
k. Termination
for “Cause”
shall
mean termination by
reason
of: (i) any act or omission knowingly undertaken or omitted by Executive
with
the intent of causing damage to the Company or its affiliates, its properties,
assets or business, or its stockholders, officers, directors or employees;
(ii)
any act of Executive involving a material personal profit to Executive,
including, without limitation, any fraud, misappropriation or embezzlement,
involving properties, assets or funds of the Company or any of its subsidiaries;
(iii) Executive's consistent failure to perform his normal duties or any
obligation under any provision of this Agreement, in either case, as directed
by
the Board; (iv) conviction of, or pleading nolo contendere to, (A) any crime
or
offense involving monies or other property of the Company; (B) any felony
offense; or (C) any crime of moral turpitude; or (v) the chronic or habitual
use
or consumption of drugs or alcoholic beverages.
l. “Total
Cash Compensation”
shall
mean an amount equal to the sum of Executive's annual base salary for the
prior
fiscal year including any bonus awards.
m. “Voting
Securities”
shall
mean the issued and outstanding shares of Common Stock of the Company that
are
entitled to vote on a particular matter.
2. Vesting.
In the
event of a Change in Control, and provided that Executive is employed by
the
Company at the time of such Change in Control: (i) all of the outstanding
Options shall become immediately vested and exercisable, and (ii) the entire
unvested portion of any shares of Restricted Stock shall accelerate and
immediately vest.
3. Payment
of Bonus.
In the
event of a Change in Control, and provided that Executive is employed by
the
Company at the time of such Change in Control, Executive shall be entitled
to
receive the following: (A) (i) in the event such Change in Control occurs
in the
first six (6) months of the Company’s then existing fiscal year, Executive shall
receive a one time lump-sum cash payment equal to the product of Executive’s
Anticipated Annual Bonus, multiplied by 0.50, or (ii) in the event such Change
in Control occurs during any period following the first six (6) months of
the
Company’s then existing fiscal year, Executive shall receive a one time lump-sum
cash payment equal to a pro-rated portion of Executive’s Anticipated Annual
Bonus, pro-rated based upon the number of months of service the Executive
had
provided in the then existing fiscal year (each a “Bonus
Payment”);
and
(B) in the event that Executive is entitled to receive commissions based
on
sales under any then existing Sales Commission Plan, Executive shall be entitled
to receive any and all then earned sales commissions (“Sales
Commission Payments”)
for
the remainder of the then existing fiscal year (notwithstanding when the
Change
in Control occurs). Any Bonus Payment shall be payable by Company (or its
corporate successor) to
Executive within five (5) business days following the consummation of such
Change in Control, and any Sales Commission Payments will be payable in
accordance with the terms of the Sales Commission Plan. The Company shall
cause
any successor/acquiring entity in such Change in Control to adopt the Sales
Commission Plan.
4. Xxxxxxxxxxx.Xx
the
event that (i) a Change in Control occurs with respect to the Company (and
provided that Executive is employed by the Company at the time of such Change
in
Control), and (ii) within a period of two (2) years following the closing
of
such Change in Control, Executive either (a) is terminated by the Company
(or
its corporate successor) without Cause, or (b) ceases
to
provide services to the Company (or its corporate successor) as a result
of an
Involuntary Termination with respect to Executive,
then
Executive shall be entitled to receive the following compensation:
(i) a
one
time lump-sum cash payment in the amount of [__________ percent (__%)] of
the
total amount of Executive's Total Cash Compensation, payable by Company (or
its
corporate successor) to Executive within five (5) business days following
the
Termination Date;
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(ii) for
a
period of [_________ (___) years] after the Termination Date, the Company
(or
its corporate successor) shall continue to make available to Executive medical
benefits on a basis that is substantially similar (in benefits to Executive
and
costs to Company), in the aggregate, to the benefits that were available
to the
Executive immediately prior to the Change in Control.
5. Termination
of Agreement.
In
the
event that Executive ceases to provide services to the Company (or its
successor) for any reason, prior to a Change of Control, this Agreement shall
terminate without further action by the Company or Executive, and shall
thereafter be deemed null and void.
6. General
Release and Waiver.
As a
condition to any payment under this Agreement, in addition to the other
requirements set forth herein, Executive shall enter into and deliver to
the
Company a general release and waiver in such form and containing such terms
and
conditions as the Board may require.
7. Executive
Covenants.
a. For
a
period of one (1) year after the Termination Date (“Restricted
Period”),
Executive covenants not to, either directly or indirectly, for Executive
or on
behalf of or in conjunction with any other person, company, partnership,
corporation, business, group, or other entity (each, a “Person”),
solicit or attempt to solicit, recruit or attempt to recruit any employee,
agent, or contract worker of the Company with whom Executive had contact
during
the course of [his or her] employment with the Company.
b. Executive
further covenants and agrees that during the Restricted Period, Executive
shall
not, either directly or indirectly, for [himself or herself] or on behalf
of or
in conjunction with any other person or entity, (i) induce or attempt to
induce
any employee, officer or consultant of the Company to supply Confidential
Information or Trade Secrets, as defined in Section 8 herein, of the Company
to
any third person, firm or corporation, or (ii) induce or attempt to induce
any
Person who, as of the date of the inducement or attempted inducement or within
twelve (12) months prior to that date, is or was a customer, supplier, vendor,
licensee, licensor or other business relation of the Company, to cease doing
business with the Company or in any way interfere with the relationship between
any such customer, supplier, vendor, licensee, licensor or other business
relation and the Company.
c. The
covenants in this Section
7
are
severable and separate, and the unenforceability of any specific covenant
shall
not affect the provisions of any other covenant. If any provision of this
Section
7 relating
to the time period, scope, or geographic areas of the restrictive covenants
shall be declared by a court of competent jurisdiction to exceed the maximum
time period, scope, or geographic area, as applicable, that such court deems
reasonable and enforceable, then this Agreement shall automatically be
considered to have been amended and revised to reflect such
determination.
d. All
of
the covenants in this Section
7
shall be
construed as an agreement independent of any other provisions in this Agreement,
and the existence of any claim or cause of action Executive may have against
the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of such covenants.
e. Executive
has carefully read and considered the provisions of this Section
7
and,
having done so, agrees that the restrictive covenants in this Section
7
impose a
fair and reasonable restraint on Executive and are reasonably required to
protect the interests of the Company and its officers, directors, employees,
and
stockholders.
8. Trade
Secrets and Confidential Information.
a. For
purposes of this Section, “Confidential
Information”
means
any data or information (other than Trade Secrets) that is valuable to the
Company (or, if owned by someone else, is valuable to that third party) and
not
generally known to the public or to competitors in the industry, including,
but
not limited to, any non-public information (regardless of whether in writing
or
retained as personal knowledge) pertaining to research and development; product
costs and processes; stockholder information; pricing, cost, or profit factors;
quality programs; annual budget and long-range business plans; marketing
plans
and methods; contracts and bids; and personnel. “Trade
Secret”
means
information including, but not limited to, any technical or nontechnical
data,
formula, pattern, compilation, program, device, method, technique, drawing,
process, financial data, financial plan, product plan, list of actual or
potential customers or suppliers or other information similar to any of the
foregoing, which (i) derives economic value, actual or potential, from not
being
generally known to, and not being readily ascertainable by proper means by,
other persons who can derive economic value from its disclosure or use and
(ii)
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.
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b. Executive
acknowledges that [he or she] has been employed by the Company in a confidential
relationship wherein [he or she], in the course of his employment with the
Company, has received and has had access to Confidential Information and
Trade
Secrets of the Company and accordingly, [he or she] is willing to enter into
the
covenants contained in Sections
8,
9,
and
10
of this
Agreement in order to provide the Company with what [he or she] considers
to be
reasonable protection for its interests.
c. Executive
hereby agrees that, during
the Restricted Period,
[he or
she] will hold in confidence all Confidential Information of the Company
that
came into [his or her] knowledge during [his or her] employment by the Company
and will not disclose, publish or make use of such Confidential Information
without the prior written consent of the Company.
d. Executive
hereby agrees to hold in confidence all Trade Secrets of the Company that
came
into [his or her] knowledge during [his or her] employment by the Company
and
shall not disclose, publish, or make use of at any time after the Termination
Date such Trade Secrets without the prior written consent of the Company
for as
long as the information remains a Trade Secret.
e. Notwithstanding
the foregoing, the provisions of this Section will not apply to
(i) Confidential Information or Trade Secrets that otherwise become
generally known in the industry or to the public through no act of Executive
or
any person or entity acting by or on Executive's behalf, (ii) information
independently developed by Executive without reference to the Company's
Confidential Information or Trade Secrets, or (iii) disclosure of Confidential
Information or Trade Secrets to the extent required to be disclosed by a
court
or governmental agency pursuant to a statute, regulation or valid order
(provided that Executive first notifies the Company and gives it the opportunity
to seek a protective order or to contest such required disclosure).
f. The
parties agree that the restrictions stated in this Section
8
are in
addition to and not in lieu of protections afforded to trade secrets and
confidential information under applicable state law. Nothing in this Agreement
is intended to or shall be interpreted as diminishing or otherwise limiting
the
Company's rights under applicable state law to protect its trade secrets
and
confidential information.
9. Return
of Company Property.
Upon
the Termination Date or as promptly thereafter as is practicable, Executive
shall deliver to the Company all correspondence, reports, records, designs,
patents, business plans, financial statements, manuals, memoranda, customer
lists, customer databases, charts, advertising materials, other similar data
and
other property delivered to or compiled by Executive by or on behalf of the
Company or its representatives, vendors or customers which pertain to the
business of the Company or future plans of the Company.
10. No
Prior Agreements.
Executive hereby represents and warrants that the execution of this Agreement
by
Executive and the performance of his duties hereunder will not violate or
be a
breach of any agreement with the Company, a former employer, client, or any
other person or entity.
11. Assignment;
Binding Effect.
No
assignment or transfer by any party of such party's rights and obligations
under
this Agreement will be made except with the prior written consent of the
other
parties to this Agreement; provided that the Company may assign this Agreement
only to the surviving entity in a Change-in-Control, provided that any such
assignee shall assume this Agreement in a writing delivered to Executive.
Subject to the preceding sentence, this Agreement shall be binding upon,
inure
to the benefit of, and be enforceable by the parties and their respective
heirs,
legal representatives, successors, and permitted assigns.
12. Complete
Agreement; Waiver; Amendment.
Executive has no oral representations, understandings, or agreements with
the
Company or any of their respective officers, directors, or representatives
covering the same subject matter as this Agreement. This Agreement is the
final,
complete, and exclusive statement of expression of the agreement between
the
Company and Executive with respect to the subject matter hereof, and cannot
be
varied, contradicted, or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not
be
later modified except by a further writing signed by duly authorized officers
of
the Company and by Executive, and no term of this agreement may be waived
except
by a writing signed by the party waiving the benefit of such term.
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13. Notice.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
|
To
the Company:
|
Electronic
Clearing House, Inc.
|
000
Xxxxx
Xxxxxxxxx
Xxxxxxxxx,
Xxxxxxxxxx 00000
Attn:
Board
of
Directors
Facsimile
No.: (000) 000-0000
|
To
the Executive:
|
_____________________
|
|
|
_____________________
|
|
_____________________
|
|
|
Facsimile
No.: (___) ________
|
14. Severability;
Headings.
If any
provision of the Agreement is rendered or declared illegal or unenforceable
by
reason of any existing or subsequently enacted legislation or by the decision
of
any arbitrator or by decree of a court of last resort, the parties shall
promptly meet and negotiate substitute provisions for those rendered or declared
illegal or unenforceable to preserve the original intent of this Agreement
to
the extent legally possible, but all other provisions of this Agreement shall
remain in full force and effect.
15. Equitable
Remedy.
Because
of the difficulty of measuring economic losses to the Company as a result
of a
breach of the covenants set forth in Sections
7 through 11,
and
because of the immediate and irreparable damage that would be caused to the
Company for which monetary damages would not be a sufficient remedy, it is
hereby agreed that in addition to all other remedies that may be available
to
the Company at law or in equity, the Company shall be entitled to specific
performance and any injunctive or other equitable relief as a remedy for
any
breach or threatened breach of Executive's covenants.
16. Jointly
Drafted.
The
parties and their respective counsel have participated jointly in the
negotiation and drafting of this Agreement. In the event that an ambiguity
or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship
of any
of the provisions of this Agreement.
17. Governing
Law.
This
Agreement shall in all respects be governed by and construed in accordance
with
the laws of the State of California, not including the choice-of-law rules
thereof. All disputes arising from or relating to this Agreement shall be
subject to the exclusive jurisdiction of and be litigated in the state or
federal courts located in the State of California. All parties hereby consent
to
the exclusive jurisdiction and venue of such courts for the litigation of
all
disputes and waive any claims of improper venue, lack of personal jurisdiction,
or lack of subject matter jurisdiction as to any such disputes.
18. Attorney's
Fees.
The
losing party shall be liable to the prevailing party for its reasonable costs
and attorney's fees incurred in any action to enforce this
Agreement.
N
WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed
as of
the date first written above.
| Electronic Clearing House, Inc. | |||
|
By:
|
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|
Name:
|
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|
Title:
|
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|
EXECUTIVE:
|
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[______________]
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