EXHIBIT 10.40
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement (the "Agreement"), dated as of
August 26, 1998, is by and between LifeRate Systems, Inc., a Minnesota
corporation (the "Company"), and Xxxxx X. Xxxxxxx ("Xxxxxxx").
A. The Company and Xxxxxxx entered into an employment agreement, dated as of
August 18, 1997, as amended on November 13, 1997 (as so amended, the
"Employment Agreement"), which expires on August 26, 1998.
X. Xxxxxxx and the Company wish to acknowledge the expiration of the
Employment Agreement and their respective continuing rights and
obligations thereunder and to provide for the termination of Xxxxxxx'x
employment with the Company in a final and binding way that settles and
resolves all existing and potential disputes between them, as provided in
this Agreement.
Accordingly, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Xxxxxxx and the Company agree as
follows:
1. Expiration of Employment Agreement. The Company and Xxxxxxx hereby agree that
the Employment Agreement, and all rights and obligations of either the Company
or Xxxxxxx thereunder, will expire on August 26, 1998, except that Xxxxxxx shall
continue to be bound by the terms of Sections 8, 9, 10 and 11 of the Employment
Agreement as provided therein after such date.
2. Resignation. Xxxxxxx reaffirms his resignation as an employee, officer,
including the offices of Chief Executive Officer and President, and a director
of the Company effective August 19, 1998.
3. Payments and Benefits. Subject to the terms and conditions of this Agreement,
including the release set forth in Section 7, the Company will:
(a) continue to pay Xxxxxxx at his annual base salary as provided in the
Employment Agreement of $225,000 through August 31, 1998, in accordance
with the standard payroll practices of the Company;
(b) pay Xxxxxxx $15,000 per month, subject to applicable federal, state or
local withholding and employment tax requirements, through October 31,
1998, in accordance with the standard payroll practices of the Company;
(c) pay Xxxxxxx the $100,000 bonus required under Section 5(c) of the
Employment Agreement, subject to applicable federal, state or local
withholding and employment tax requirements, payable as follows: (i)
$35,000 in cash to be paid upon expiration of the fifteen-day rescission
period set forth in Section 7, and (ii) the remaining $65,000 to be paid
to Xxxxxxx by issuing 260,000 shares of the Company's Common Stock, based
on
the closing price of the Common Stock on August 19, 1998, as soon as
reasonably practical after the expiration of such fifteen-day rescission
period.
(d) pay or reimburse Xxxxxxx for all reasonable expenses incurred through
August 28, 1998 while performing his duties under the Employment
Agreement, provided that Xxxxxxx accounts properly for such expenses to
the Company in accordance with Company policies;
(e) continue to provide Xxxxxxx with his current car allowance of $455 per
month through October 31, 1998; and
(f) continue to provide group medical and dental insurance coverage for
Xxxxxxx and his family through October 31, 1998 on the same terms as
provided prior to the date hereof; provided, however, that the Company
will not be obligated to continue to provide group medical or dental
insurance coverage if Xxxxxxx becomes covered under a policy provided by a
subsequent employer with comparable benefits and at a comparable cost to
Xxxxxxx. The Company and Xxxxxxx acknowledge and agree that Xxxxxxx'x
COBRA rights shall begin on November 1, 1998.
The Company's obligations under this Section 3 shall terminate if Xxxxxxx
rescinds this Agreement or any part hereof. The Company shall withhold and
deduct from payments made under this Section 3 all legally required
amounts necessary to satisfy applicable federal, state or local
withholding and employment tax requirements and the employee's portion of
insurance premiums for the Company's group medical and dental insurance
policies.
4. Stock Options. The Company and Xxxxxxx acknowledge and agree that options
previously granted to Xxxxxxx under the Non-Statutory Stock Option Agreement,
dated November 13, 1997, covering 650,000 shares of the Company's Common Stock
shall vest with respect to 216,666 shares. The foregoing Option Agreement is
hereby amended to the extent necessary to provide that such option shall remain
exercisable with respect to 216,666 shares through August 26, 2003, even though
Xxxxxxx will not continue to employed by the Company. Except as modified in this
Agreement, the terms and conditions of the foregoing Option Agreement shall
remain in full force and effect. Xxxxxxx acknowledges that he does not have any
other options or rights to acquire any other shares of Common Stock from the
Company, except as set forth in Section 3.
5. Reference Letter. As further consideration for the terms of this Agreement,
the Company will provide Xxxxxxx with a letter of reference which is mutually
acceptable to both parties. No other reference will be given by the Company
regarding Xxxxxxx or his employment, except that the Company may respond to
requests for references by only confirming the dates of Xxxxxxx'x employment
with the Company and Xxxxxxx'x last job title.
6. Records, Documents and Property. Xxxxxxx will return to the Company all its
records, correspondence, documents and property as well as all keys in his
possession at the time he signs this Agreement.
2
7. Release. Xxxxxxx agrees to give up and forever relinquish all claims which he
has or may have against the Company in exchange for the consideration set forth
in this Agreement. This is a full and complete release and waiver of any and all
claims, complaints, causes of action or demands of whatever kind Xxxxxxx may
have against the Company for events occurring up to the date of his signature on
this Agreement, whether known or unknown, foreseen or unforeseen, including, but
not limited to, all claims which relate in any way to the Employment Agreement,
employment or termination of employment with the Company. Xxxxxxx will not bring
any lawsuits, file any charges, complaints or notices, or make any other demands
against the Company based on any claim he may have against the Company. Xxxxxxx
agrees that the consideration set forth above is valuable consideration above
and beyond what is otherwise due to him from the Company.
Xxxxxxx acknowledges and further agrees that by giving up all of his
claims against the Company, he also gives up any claims he may have against its
predecessors, successors, subsidiaries and affiliates and any and all officers,
directors, shareholders, employees and agents of the Company and all
predecessors, successors, subsidiaries and affiliates arising out of any
actions, conduct, decisions, behavior, omissions or events occurring up to the
date hereof. This Release extends to all claims which Xxxxxxx may have for age
discrimination or any other form of employment discrimination prohibited under
Title VII of the Federal Civil Rights Act of 1964, the Federal Age
Discrimination in Employment Act, The Americans with Disabilities Act, The
Minnesota Human Rights Act and all other state and federal laws. It also extends
to but is not limited to all claims that Xxxxxxx may have for wrongful
discharge, breach of contract, breach of any express or implied promise,
interference with contract, misrepresentation, fraud, retaliation, breach of
public policy, infliction of emotional distress, defamation, promissory
estoppel, invasion of privacy, or any other theory, whether legal or equitable.
This Release may be rescinded by Xxxxxxx within fifteen (15) calendar days
of the date on which it is signed. To be effective, such rescission must be in
writing and delivered to the Company in the care of Xxxx X. Xxxxxxxx, Chairman
of the Board, Manchester Financial Group, IDS Center, 00 Xxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000, either delivered by hand or properly addressed,
certified mail, return receipt requested, postmarked within the 15-day period.
8. Effect of Non-Execution or Rescission. Xxxxxxx agrees that if he does not
execute this Agreement or if he rescinds the Release, this Agreement is null and
void and the Company has no obligations whatsoever under this Agreement.
9. Additional Representations and Covenants.
(a) Voluntary Action. Xxxxxxx represents and agrees that he: (a) has
carefully read and understands all of the provisions of this Agreement;
(b) has been given the opportunity to consult with legal and tax counsel
of his choice, and has in fact consulted with such legal and tax counsel
regarding the terms of this Agreement; and (c) fully understands that by
signing this Agreement, he is giving up all rights to pursue any claims
against the Company and others mentioned in the Release contained in
Section 7 for any reason arising prior to the date of this Agreement.
3
(b) Adequate Time. Xxxxxxx has had at least twenty-one (21) days to
consider whether or not he should enter into this Agreement or waives such
right, and has been advised to consult with legal counsel of his choice
prior to entering into this Agreement.
(c) Non-Disclosure. This Agreement is confidential. Neither the Company
nor Xxxxxxx will reveal the terms of the Agreement except as may be
necessary to effect its terms or as required by law, including without
limitation the federal securities laws, court order or valid legal
proceedings. Xxxxxxx may also disclose the terms to his immediate family,
legal counsel, investment advisor or banks, and accountant or tax advisor.
The Company may disclose the terms to its officers and directors, outside
auditors, tax advisors and legal counsel.
(d) Investment Representations. Xxxxxxx represents and warrants to the
Company the following with respect to the shares of Common Stock to be
issued to him under Section 3(c) of this Agreement (the "Shares"):
(i) Xxxxxxx confirms that he is fully informed regarding the
financial condition of the Company, the administration of its
business affairs and its prospects for the future, and that the
Company makes no assurance whatsoever concerning the present and
prospective value of the Shares to be acquired.
(ii) The Shares as an investment, are speculative and involve a high
degree of risk. Xxxxxxx believes that an investment in the Shares is
suitable for him based upon his investment objectives and financial
needs, and he has the financial means to undertake the risks of an
investment in the Shares, to hold the Shares for an indefinite
period of time, and to withstand a complete loss of his investment
in the Shares.
(iii) Xxxxxxx has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and
risks of an investment in the Shares. Xxxxxxx has obtained, to the
extent deemed necessary, personal professional advice with respect
to the risks inherent in, and the suitability of, an investment in
the Shares in light of his financial condition and investment needs.
(iv) The Shares are being acquired by Xxxxxxx for investment
purposes in his name solely for his own beneficial interest and not
as nominee for, or for the beneficial interest of, or with the
intention to transfer to, any other person, trust or organization.
(v) Xxxxxxx acknowledges that (a) he must bear the economic risk of
an investment in the Shares for an indefinite period of time because
the Shares have not been registered under the Securities Act of 1933
or any applicable state securities laws and therefore may not be
sold, transferred, assigned or otherwise disposed of unless such
disposition is subsequently registered under such laws or exemptions
from such registrations are available, and (b) a legend will be
placed on the certificate evidencing the Shares stating that the
Shares have not been
4
registered under the Securities Act of 1933 and referencing the
restrictions on the transferability of the Shares.
10. Miscellaneous.
(a) Entire Agreement. Except for Sections 8, 9, 10 and 11 of the
Employment Agreement that remain in force, this Agreement constitutes the
entire agreement between the parties. No modification, amendment or change
of any kind to this Agreement shall be effective unless it is in writing
and signed by both parties.
(b) Indemnification. To the extent permitted by and in accordance with
Section 302A.521 of the Minnesota Business Corporation Act, or any
successor provision, the Company shall indemnify and hold Xxxxxxx harmless
from any loss or damage incurred by Xxxxxxx directly as a result of his
acting or failing to act within his "official capacity," as defined in
Section 302A.521.
(c) Governing Law. This Agreement will be construed in accordance with the
laws of the State of Minnesota. The parties agree that any dispute arising
hereunder shall be submitted only to a state or federal court of competent
jurisdiction in Minnesota, to whose jurisdiction all parties hereto
consent.
(d) Severability. Wherever possible, each provision of this Agreement will
be interpreted so that it is valid under applicable law. If any provision
of this Agreement is to any extent invalid under applicable law, that
provision will still be effective to the extent that it remains valid. The
remainder of this Agreement also will continue to be valid, and the entire
Agreement will continue to be valid in other jurisdictions.
(e) Non-admission. Nothing in this Agreement is intended to be, nor will
be deemed to be, an admission of liability by the Company or Xxxxxxx that
either of them has violated any state or federal statute, local ordinance,
or principle of common law, or that either party has engaged in any
wrongdoing.
(f) Successors and Assigns. This Agreement is binding on and inures to the
benefit of the Company's successors and assigns, all of which are included
in the term the "Company" as it is used in this Agreement. This Agreement
is also binding on Xxxxxxx'x heirs, spouse, successors, assigns and legal
representatives.
(g) Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which will be deemed to be an original, but all
of which together will constitute one and the same instrument.
5
The parties have duly executed this Agreement as of the date first written
above.
LIFERATE SYSTEMS, INC.
Date: By /s/ Xxxx X. Xxxxxxxx
------------------- ----------------------------------
Xxxx X. Xxxxxxxx
Chairman of the Board
Date: /s/ Xxxxx X. Xxxxxxx
------------------- ----------------------------------
Xxxxx X. Xxxxxxx
