SEPARATION AGREEMENT AND RELEASE
This Separation Agreement and Release (the "Agreement") is entered into
by and between Datakey, Inc. (the "Company") and Xxxx X. Xxxxxxxxx ("Employee")
effective as of January 1, 1997.
RECITALS
Xxxx X. Xxxxxxxxx has been an officer, director and employee of the
Company since 1983. In December 1996, Employee resigned as the Chief Executive
Officer of the Company and continued as an employee of the Company through
December 31, 1996. In consideration of his covenants hereunder and his release
of claims set forth hereunder, the Company has made provisions for certain
payments and other benefits to be paid to Employee.
AGREEMENT
NOW THEREFORE, the parties agree as follows:
1. Company. Company, as used herein, means Datakey, Inc., its
successors and assigns, its subsidiaries, and its present and former directors,
officers, shareholders, employees, and agents, whether in their individual or
official capacities.
2. Employee. Employee, as used herein, means Xxxx X. Xxxxxxxxx and
anyone who has or obtains legal rights or claims through him.
3. Resignation. On or about December 1, 1996, Employee resigned as the
Chief Executive Officer of the Company. He continued as a non-officer employee
of the Company until December 31, 1996, at which time he resigned as an
employee. Employee will continue as a director of the Company at his discretion
until the next annual meeting of the Company's shareholders or until his
successor has been elected.
4. Agreement Not to Compete.
(a) Restrictive Covenant. Employee agrees that until December
31, 1998, he shall not, directly or indirectly, engage in competition
with the Company in any manner or capacity (e.g., as an advisor,
principal, agent, partner, officer, directors, stockholder, employee,
member of any association, or otherwise) in any phase of the business
which the Company is currently conducting or as part of its business
plan intends to conduct.
(b) Equitable Remedies. The monthly severance payments to be
made to Employee through December of 1998 as set forth in Section 5(a)
- 1 -
below are in part in consideration for Employee's agreement not to
compete. If Employee violates his agreement not to compete, the Company
shall have the right to terminate his monthly payment and seek
injunctive relief prohibiting Employee from competing against the
Company.
(c) Geographic Extent of Covenant. The obligations of Employee
not to compete shall apply to the entire United States.
(d) Indirect Competition. Employee further agrees that through
December, 1998, he will not, directly or indirectly, assist or
encourage any other person in carrying out, directly or indirectly, any
activity that would be prohibited by the above provisions of Section
4(a) if such activity were carried out by Employee, either directly or
indirectly; and in particular Employee agrees that he will not,
directly or indirectly, induce any employee of the Company to carry
out, directly or indirectly, any such activity.
(e) Non-Solicitation. Employee further agrees that through
December 31, 1998, he will not solicit or encourage employees of the
Company to terminate their employment with the Company or contact or in
any way interfere or attempt to interfere with the Company's
relationship with any current or potential customers of Datakey.
(f) Construction of Agreement Not to Compete. To the extent
any provision of this Section 4 shall be invalid or unenforceable, it
shall be considered deleted herefrom and the remainder of such
provision and this Section 4 shall be unaffected and shall continue in
full force and effect. In furtherance to and not in limitation of the
foregoing, should the duration or geographical extent of, or business
activities covered by, any provision of this Section 4 be in excess of
that which is valid and enforceable under applicable law, then such
provision shall be construed to cover only that duration, extent or
activities which are validly and enforceably covered. Employee
acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Section 4 be given the construction which renders
its provisions valid and enforceable to the maximum extent (not
exceeding its expressed terms) possible under applicable laws.
5. Benefits.
(a) Through December 31, 1998, Employee shall continue to
receive on a monthly basis, in accordance with Datakey's current
payroll practices, an amount of severance equal to his monthly base
salary in effect on December 31, 1996.
(b) The Company will continue to provide to Employee access to
medical and health coverage, under its plans as they currently exist or
may hereafter be amended, at Company subsidized rates during the
twenty-four month severance pay period. Thereafter, Employee and his
covered dependents will be entitled to elect to continue coverage under
- 2 -
COBRA to the extent it is available. Coverage by the Company or under
COBRA will end on the earlier of Employee's obtaining new employment
which gives him the ability to provide medical and health insurance
coverage for himself and his family through his new employer, or the
failure to pay any premium when due.
(c) The Company will expend up to $6,000 to be applied only to
actual outplacement counseling of Employee's choice.
(d) Unpaid vacation benefits, if any, will be paid to Employee
on or about January 15, 1997.
(b) Effective as of January 1, 1997 Employee's vested account
balance under the Company's 401(k) Plan and Trust shall be distributed
to Employee or at his direction, pursuant to the terms of the 401(k)
Plan and Employee's election thereunder.
6. Stock Options. Employee has been granted the following stock
options: (i) 25,000 shares at an exercise price of $3.625 per share which
expires on April 30, 2005 and which is vested at 16,600 shares; and (ii) 75,000
shares at an exercise price of $5.75 per share which expires on January 12, 2002
and which is fully vested. After the termination of Employee's employment on
December 31, 1996, Employee will have until February 28, 1999, to exercise his
two stock options.
7. Release of Employment Claims. Employee hereby releases and forever
discharges the Company of and from any and all actions or causes of action,
suits, debts, claims, complaints, contracts (expressed or implied),
controversies, agreements, promises, damages, claims for attorneys' fees,
judgments, costs, disbursements, severance, compensation, vacation pay and other
benefits (except as specifically provided for in this Agreement), known or
unknown, in law or equity, Employee ever had, now has, or shall have as of the
date of this Agreement relating in any manner to Employee's employment with
and/or resignation as an officer, director or employee of the Company,
including, but not limited to, any alleged violation of any federal, state, or
local law, regulation or ordinance prohibiting discrimination or other unlawful
activity on the basis of race, color, creed, marital status, sex, age, religion,
national origin, sexual orientation, sexual harassment, disability, or any other
basis (whether arising under Title VII of the Civil Rights Act, 42 U.S.C. ss.
2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et
seq., the Americans With Disabilities Act, 42 U.S.C. ss. 12101 et seq., the
Minnesota Human Rights act, Minn. Stat. ss. 363.01 et seq., or elsewhere), or
any alleged obligation created by statute or by common law contract or tort
theory. Employee releases and discharges Company not only from any and all
claims that he could make on his own behalf, but also those that may or could be
brought by any other person or organization on his behalf. Employee affirms that
as a current or former employee he has not caused or permitted to be filed any
charge, complaint, or action against Company and agrees that he will not cause
or permit to be filed any charge, complaint, or action and that he will not
participate with any other party in the filing of any charge, complaint or
action on the basis of his employee status.
- 3 -
8. Notification of Rights Pursuant to the Federal Age Discrimination in
Employment Act (29 U.S.C. xx.xx. 621-634) and Minnesota Human Rights Act (Minn.
Stat. Ch. 363). Employee agrees that he is hereby notified that the federal Age
Discrimination in Employment Act provides that he is entitled to wait 21 days to
sign this Agreement. The 21-day period shall begin the day following the day on
which Employee receives the Agreement. Employee acknowledges that the purpose of
the 21-day period is to provide Employee adequate time to consider whether the
terms of this Agreement are acceptable to him. Employee is also hereby notified
of his right to rescind his release of claims arising under the Federal Age
Discrimination in Employment Act within 7 calendar days of his signing of this
Agreement. Employee is further notified of his right to rescind his release of
claims arising under the Minnesota Human Rights Act within 15 calendar days of
his signing of this Agreement. In order to be effective, Employee's rescission
must be in writing and delivered by hand or mail to Xxxx Xxxxxxx, Datakey, Inc.,
000 Xxxx Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000-0000. If delivered by mail, the
rescission must be postmarked within the required period, properly addressed to
Xxxx Xxxxxxx as set forth above, and sent by certified mail, return receipt
requested. Employee understands that if he rescinds his release of claims as
provided for in this paragraph, Employee will not receive, and will have to
return to Company, all benefits and payments provided for in this Agreement.
9. Confidentiality. The parties agree specifically that the contents
and terms of this Agreement shall remain confidential except as required by
applicable law or regulation (including of the Securities and Exchange
Commission or of the Nasdaq National Market). However, Employee shall be
entitled to discuss the matters contained herein with his legal and financial
advisors and his immediate family, provided they also agree to keep this
Agreement confidential. Provided further that Company shall be entitled to
discuss the matters contained herein with its legal and financial advisers and
its management employees on a need to know basis.
10. Non-Disparagement. Each party agrees not to disparage in any manner
the other party. Any such disparagement will be grounds for rescission of this
Agreement.
11. Corporate Information. Employee agrees that he will not remove any
proprietary corporate information from the Company's offices, including the
office he occupied. The determination of what information is proprietary will be
in the discretion of the Company. Subject to the foregoing, corporate
information shall include, but not be limited to, sales plans, customer
information, employee information, business correspondence and any other
information which is related to Datakey, Inc. or its subsidiaries or their
businesses. All personal property of the Employee, property which is not owned
by or is not proprietary or confidential to the Company, will be returned to
Employee.
12. Assignment. The obligations of Employee under this Agreement may
not be assigned by Employee. However, in the event of Employee's mental or
physical disability, incapacitation or death, all remaining payments shall
continue to be made to Employee's spouse, or in the event of the death of the
- 4 -
Employee's spouse, the payments will be made to Employee's estate. The Company's
rights and obligations under this Agreement will inure to the benefit and be
binding upon the Company's successors and assignees.
13. Severability. If a court rules that any part of this Agreement is
not enforceable, that part may be modified by the court to make it enforceable.
The parties expressly agree that the restrictions contained in Section 4 are
reasonable and should be enforced to the maximum extent and scope possible.
14. Governing Law. Any disputes arising under this Agreement shall be
governed by the laws of the State of Minnesota.
15. Acknowledgment of Reading and Understanding; Consultation with
Counsel; Period to Consider Agreement. Employee, by signing this Agreement,
acknowledges and agrees that he has carefully read and understood all provisions
of this Agreement and that he has entered into this Agreement knowingly and
voluntarily. Employee further acknowledges that he has consulted with counsel
before signing this Agreement. Employee also acknowledges that Company informed
him that he has 21 days from the receipt of this Agreement to consider whether
its terms are acceptable to him and that he has had the benefit of the 21-day
period. Employee acknowledges and agrees that he has not relied on any
representations or statements by Company, whether oral or written, other than
the express statements of this Agreement, in executing this Agreement.
16. Full Agreement. This Agreement contains the full agreement of the
parties and may not be modified, altered, or changed in any way except by
written agreement signed by both parties. Except as expressly stated in this
Agreement, the parties agree that this Agreement supersedes and terminates any
and all oral and written prior agreements and understandings between the
parties.
DATAKEY, INC.
Dated: January 27, 1997 By /s/ Xxxx X. Xxxxxxx
Xxxx Xxxxxxx
Chairman of the Board of Directors
Dated: February 27, 1997 /s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx
- 5 -
