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Sample Business Contracts

Severance Agreement - Selectica Inc. and Sanjay Mittal

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                                 SELECTICA, INC.
                              3 West Plumeria Drive
                             San Jose, CA 95134-2111
                               September 22, 2003

Sanjay Mittal
754 Bodega Court
Fremont, CA 94539

Dear Sanjay:

      This letter (the "Agreement") confirms the agreement between you and
Selectica, Inc. (the "Company") regarding the termination of your employment
with the Company.

      1. TERMINATION DATE. Your termination from employment with the Company and
as President, Chief Executive Officer and Chief Technical Officer of the Company
and Chairman of the Company's Board of Directors (the "Board") is effective as
of September 7, 2003 (the "Termination Date").

      2. EFFECTIVE DATE AND RESCISSION. You have up to 21 days after you
received this Agreement to review it. You are advised to consult an attorney of
your own choosing (at your own expense) before signing this Agreement.
Furthermore, you have up to seven days after you signed this Agreement to revoke
it. If you wish to revoke this Agreement after signing it, you may do so by
delivering a letter of revocation to me. If you do not revoke this Agreement,
the eighth day after the date you signed it will be the "Effective Date."
Because of the seven-day revocation period, no part of this Agreement will
become effective or enforceable until the Effective Date.

      3. SALARY AND VACATION PAY. You acknowledge and agree that the Company has
paid you $36,937.90 (less all applicable withholding taxes and other
deductions). This amount represents all of your salary earned through the
Termination Date and all of your accrued but unused vacation time or PTO. You
acknowledge that, prior to the execution of this Agreement, you were not
entitled to receive any additional money from the Company and that the only
payments and benefits that you are entitled to receive from the Company in the
future are those specified in this Agreement.

      4. CHIEF TECHNICAL ADVISOR. If you sign and do not revoke this Agreement,
the Company agrees to continue your service as Chief Technical Advisor to the
Company ("CTA Service"), commencing on September 8, 2003, and continuing until
you or the Company, at the sole discretion of either party, elect to terminate
your CTA Service in writing ("CTA Term"). During the CTA Term, (a) you will
receive $20,000 per month as your fee for the CTA Service; (b) if you elect to
continue your group health insurance coverage under the Consolidated
<PAGE>
Sanjay Mittal
September 22, 2003
Page 2


Omnibus Budget Reconciliation Act ("COBRA") after the Termination Date, then the
Company will pay your monthly premium under COBRA throughout the CTA Term and
for a period of 18 months following the month in which the CTA Service
terminates, but in no event will the Company pay your monthly premium under
COBRA after you are no longer eligible for COBRA coverage under the Company's
health plans, according to the requirements under COBRA; (c) your options to
purchase shares of the Company's Common Stock, as described in Section 6 below,
will continue to vest during the CTA Term or while you serve as a member of the
Board; and (d) you will retain your Company email address during the CTA Term or
while you serve as a member of the Board. In no event will the Company require
you to provide more than 20 hours of CTA Service per month. The Company will
reasonably accommodate your schedule and other employment activities such that
you will not be required to perform services at unreasonable times or places or
that interfere with other employment in which you may be engaged. The CTA
Service shall include, but is not limited to, consultation regarding the
strategic technology initiatives and direction of the Company and meeting with
current and prospective customers of the Company. During the CTA Term you will
receive direction from one Company representative designated by the Board. It is
the express intention of you and the Company that you are to render the CTA
Service as an independent contractor, and not as an employee, agent, joint
venturer or partner of the Company. Nothing in this Agreement shall be
interpreted or construed as creating or establishing an employment relationship
between the Company and you. Both you and the Company understand and agree that
during the CTA Term you may, and probably will, perform services for others,
except that you may not undertake to render services that violate this Agreement
or the Proprietary Information Agreement described in Section 13 below and will
not engage in any activity that is in any way competitive with the business or
demonstrably anticipated business of the Company, and will not assist any other
person or organization in competing or in preparing to compete with any business
or demonstrably anticipated business of the Company. During the CTA Term, the
Company will reimburse you for necessary and reasonable business expenses
directly related to your CTA Service that have been previously authorized by the
Board's designated representative, upon your presentation of an itemized account
and appropriate supporting documentation, all in accordance with the Company's
generally applicable policies. You will also receive indemnification with
respect to your CTA Service to the same extent as indemnification is provided
under the indemnification agreement described in Section 13 below.

      5. PERSONAL ITEMS. The Company will allow you to retain the computers (2
laptops, 1 desktop), 2 printers, 1 polycom phone, cellular phone and RIM
Blackberry provided to you by the Company for your home office, provided that
you must return to the Company and delete all information in the computers that
belongs to the Company. You agree that the aggregate value of such items is
$1,500.00. In order to retain these items, you further agree that you will take
all necessary actions to allow the Company to withhold all necessary amounts
from the payment set forth under Section 4 of this Agreement to cover all
applicable withholding taxes resulting from your retention of these items and
agree that you will make any arrangements required by the Company to satisfy the
applicable withholding taxes. The Company will pay the cell phone, DSL and
Blackberry fees and charges for the period during which you serve as the CTA and
following the termination of the CTA Service, you will be responsible for such
fees and charges.
<PAGE>
Sanjay Mittal
September 22, 2003
Page 3

      6. OPTIONS. On September 28, 2001, the Company granted you an option to
purchase 330,000 shares of its Common Stock at an exercise price per share of
$2.40 (the "First Option") and another option to purchase 170,000 shares of its
Common Stock at an exercise price per share of $2.40 (the "Second Option"). On
December 11, 2002, the Company granted you an option to purchase 500,000 shares
of its Common Stock at an exercise price per share of $2.56 (the "Third Option"
and collectively with the First Option and Second Option, known as "Options").
As of the Termination Date, you will be vested in 302,500 of the shares that are
subject to the First Option, 155,833 of the shares that are subject to the
Second Option and 111,111 shares that are subject to the Third Option. The Stock
Option Agreements and applicable stock option plans evidencing the Options will
remain in full force and effect, and you agree to remain bound by such
agreements and option plans. You acknowledge and agree that your termination
from employment with the Company does not result in any vesting acceleration
with respect to the Options, and the Options will only continue to vest
following the Termination Date as you provide CTA Service or service as a member
of the Board. Any other Stock Option Agreements or Stock Purchase Agreements
between you and the Company will also remain in full force and effect.

      7. INITIAL RELEASE OF ALL CLAIMS. In consideration for receiving the
benefits described in Sections 4 and 5 above, you waive, release and promise
never to assert any claims or causes of action, whether or not now known,
against the Company or its predecessors, successors or past or present
subsidiaries, stockholders, directors, officers, employees, consultants,
attorneys, agents, assigns and employee benefit plans with respect to any
matter, including (without limitation) any matter related to your employment
with the Company or the termination of that employment, including (without
limitation) claims to attorneys' fees or costs, claims of wrongful discharge,
constructive discharge, emotional distress, defamation, invasion of privacy,
violation of public policy, personal injury, retaliation, fraud, breach of
contract or breach of the covenant of good faith and fair dealing and any claims
of discrimination or harassment based on sex, age, race, national origin,
disability or any other basis under Title VII of the Civil Rights Act of 1964,
the Fair Labor Standards Act, the Equal Pay Act of 1963, the Americans With
Disabilities Act, the Civil Rights Act of 1866, the Age Discrimination in
Employment Act of 1967 (ADEA), the California Labor Code, the California Fair
Employment and Housing Act, the California Family Rights Act, the Family Medical
Leave Act and all other laws and regulations relating to employment. However,
this release covers only those claims that arose prior to the execution of this
Agreement. Execution of this Agreement does not bar any claim that arises after
execution of this Agreement, including (without limitation) a claim for breach
of this Agreement. The Company waives, releases and promises never to assert any
claims for causes of action, whether or not now known, against you, your heirs
successors or assigns, with respect to any matter, including (without
limitation) any matter related to your employment with the Company, including
(without limitation) claims to attorneys' fees or costs, claims of violation of
any corporate standards or policies, misrepresentation (intentional or
unintentional), defamation, invasion of privacy, violation of public policy,
fraud, breach of contract or breach of the covenant of good faith and fair
dealing. However, this release covers only those claims that arose prior to the
execution of this Agreement. Execution of this Agreement does not bar any claim
that arises after execution of this Agreement, including (without limitation) a
claim for breach of this Agreement.
<PAGE>
Sanjay Mittal
September 22, 2003
Page 4

      8. WAIVER. You and the Company understand that each is releasing
potentially unknown claims, and that you and the Company have limited knowledge
with respect to some of the claims being released. You and the Company
acknowledge that there is a risk that, after signing this Agreement, you or the
Company may learn information that might have affected either or our decision to
enter into this Agreement. You and the Company assume this risk and all other
risks of any mistake in entering into this Agreement. You and the Company agree
that this Agreement is fairly and knowingly made and you and the Company
expressly waive and release any and all rights and benefits under Section 1542
of the California Civil Code (or any analogous law of any other state), which
reads as follows: "A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his settlement
with the debtor."

      9. SECOND RELEASE OF CLAIMS. Provided you execute and do not revoke the
General Release of All Claims attached hereto as Exhibit A (the "Release") in
accordance with the terms of the Release, the Company agrees to provide you with
the following severance benefits although you otherwise would not have been
entitled to receive any severance pay from the Company: on the date that is
eight days following the execution of the Release and provided you do not revoke
the Release within such period, the Company will make an aggregate severance
payment to you equal to $412,500 (which is equal to eighteen (18) months of your
monthly base salary of $22,916.66 that was in effect on your Termination Date)
in the form of a lump sum payment. Such severance payment will be subject to all
applicable withholding taxes. You understand that you must immediately return
this severance payment to the Company in the event it is determined by the final
judgment in a court of law having proper jurisdiction (after appeals, if
processed) that you breached any provision of this Agreement or the Release.

      10. PROMISE NOT TO SUE. You and the Company agree that neither you nor it
will ever, individually or with or through any other person or entity, commence,
aid in any way (except as required by legal process) or prosecute, or cause or
permit to be commenced or prosecuted, any action or other proceeding based on
any claim that is the subject of this Agreement.

      11. PROPRIETARY INFORMATION. You agree that all Inventions (as defined
below) and all other business, technical and financial information (including,
without limitation, the identity of and information relating to customers or
employees) you develop, learn or obtain during the CTA Term that relate to the
Company or the business or demonstrably anticipated business of the Company or
that are received by or for the Company in confidence, constitute "Proprietary
Information." "Inventions" shall include all inventions (whether or not
patentable), works of authorship, mask works, designs, know-how, ideas and
information made or conceived or reduced to practice, in whole or in part, by
you during the CTA Term. The Company shall own all right, title and interest
(including patent rights, copyrights, trade secret rights, and all other
intellectual property rights) relating to any and all Inventions that are
disclosed pursuant to, arise from or relate to the CTA Service. You shall and
hereby do make all assignments necessary to accomplish the foregoing. You agree
to execute such documents as the Company may reasonably request in order to
further evidence, record, perfect, maintain and enforce such
<PAGE>
Sanjay Mittal
September 22, 2003
Page 4

assignments. If you are unavailable to execute such documents for any reason,
you hereby irrevocably designate and appoint the Company as your agent and
attorney-in-fact to act for and in your behalf to execute and file any document
and to do all other lawfully permitted acts to further the purposes of the
foregoing with the same legal force and effect as if executed by you. You will
hold in confidence and not disclose or, except within the scope of your CTA
Service, use any Proprietary Information. However, you shall not be obligated
under this paragraph with respect to information you can document is or becomes
readily publicly available without restriction through no fault of yours. Upon
termination of your CTA Service, you will promptly return to the Company all
items containing or embodying Proprietary Information (including all copies),
except that you may keep your personal copies of (i) your compensation records,
(ii) materials distributed to stockholders generally and (iii) this Agreement.
You also recognize and agree that you have no expectation of privacy with
respect to the Company's telecommunications, networking or information
processing systems (including, without limitation, stored computer files, email
messages and voice messages) and that your activity and any files or messages on
or using any of those systems may be monitored at any time without notice. Any
such monitoring, if and when it happens, will be performed in accordance with
established Company policies.

      12. NO ADMISSION. Nothing contained in this Agreement will constitute or
be treated as an admission by you or the Company of liability, any wrongdoing or
any violation of law.

      13. OTHER AGREEMENTS. At all times in the future, you will remain bound by
your Proprietary Information and Inventions Agreement with the Company, which
you signed on April 4, 1999 ("Proprietary Information Agreement"), and a copy of
which is attached as Exhibit B, and the indemnification agreement that you have
executed on March 10, 2000 with the Company, a copy of which is attached as
Exhibit C. You agree that Section 7 of the employment agreement between you and
the Company, dated January 1, 2003 (the "Employment Agreement") remains in full
force and effect and agree that in no event are you entitled to any of the
termination benefits described in Section 6 of the Employment Agreement as a
result of your termination from employment, effective as of the Termination
Date, nor will you be entitled to such termination benefits at any time in the
future. Except as expressly provided in this Agreement, this Agreement renders
null and void all prior agreements between you and the Company and constitutes
the entire agreement between you and the Company regarding the subject matter of
this Agreement. This Agreement may be modified only in a written document signed
by you and a duly authorized member of the Board.

      14. COMPANY PROPERTY. You represent that you have returned to the Company
all property that belongs to the Company, including (without limitation) copies
of documents that belong to the Company and files stored on your computer(s)
that contain information belonging to the Company, except that you may retain
the items described in Section 5 above. During your tenure as CTA and a member
of the Board, you are entitled to have a number of confidential documents that
you will immediately return to the Company or destroy once you cease to be in
neither position.
<PAGE>
Sanjay Mittal
September 22, 2003
Page 6

      15. CONFIDENTIALITY OF AGREEMENT. You and the Company agree that neither
you nor it will disclose to others the existence or terms of this Agreement,
except that you may disclose such information (a) to your spouse, attorney or
tax adviser if such individuals agree that they will not disclose to others the
existence or terms of this Agreement, (b) in response to a subpoena or other
legal process requiring said disclosure, or (c) that is in the public domain
other than through your act or acts in violation of this Agreement, and the
Company may disclose the existence or terms of this Agreement (a) to those
officers and directors with a need to know the same, (b) in response to a
subpoena or other legal process requiring said disclosure, (c) if the
information is in the public domain other than through the Company's act or acts
in violation of this Agreement, (d) if such disclosure is required by applicable
law, including but not limited to SEC disclosure and filing requirements, or (e)
if such disclosure is deemed required after consultation with the Company's
outside counsel.

      16. NO DISPARAGEMENT. You agree that you will not make any negative or
disparaging statements (orally or in writing) about the Company or its
stockholders, directors, officers, employees, products, services or business
practices, except as required by subpoena or other compulsory process of law.
The Company agrees that neither its officers nor the members of the Board will
make any negative or disparaging statements (orally or in writing) about you,
your service to the Company or your personal conduct except as required by
subpoena or other compulsory process of law.

      17. SEVERABILITY. If any term of this Agreement is held to be invalid,
void or unenforceable, the remainder of this Agreement will remain in full force
and effect and will in no way be affected, and the parties will use their best
efforts to find an alternate way to achieve the same result.

      18. CHOICE OF LAW. This Agreement will be construed and interpreted in
accordance with the laws of the State of California (other than their
choice-of-law provisions).

      19. EXECUTION. This Agreement may be executed in counterparts, each of
which will be considered an original, but all of which together will constitute
one agreement. Execution of a facsimile copy will have the same force and effect
as execution of an original, and a facsimile signature will be deemed an
original and valid signature.

      Please indicate your agreement with the above terms by signing below.

                                       Very truly yours,

                                       Selectica, Inc.

                                       By:      /s/ Michael Lyons
                                            ----------------------------
                                       Title:   Director
                                               -------------------------
<PAGE>
Sanjay Mittal
September 22, 2003
Page 7

I agree to the terms of this Agreement, and I am voluntarily signing this
release of all claims. I acknowledge that I have read and understand this
Agreement, and I understand that I cannot pursue any of the claims and rights
that I have waived in this Agreement at any time in the future.

/s/ Sanjay Mittal
---------------------------
Signature of Sanjay Mittal

Dated:  9/22/03
<PAGE>
                                    EXHIBIT A

                          GENERAL RELEASE OF ALL CLAIMS

      In consideration of the severance benefits to be provided to Mr. Sanjay
Mittal ("Mittal") by Selectica, Inc. ("the Company"), as described in the letter
agreement to which this General Release of All Claims (the "Release") is
attached as Exhibit A (the "Letter Agreement"), Mittal, on Mittal's own behalf
and on behalf of Mittal's heirs, executors, administrators and assigns, hereby
fully and forever releases and discharges the Company and its directors,
officers, employees, attorneys, consultants, agents, successors, predecessors,
subsidiaries, parent, stockholders, employee benefit plans and assigns (together
called "the Releasees"), from all known and unknown claims and causes of action
including, without limitation, any claims or causes of action arising out of or
relating in any way to Mittal's employment and service with the Company,
including the termination of that employment and service.

      1. Mittal understands and agrees that this Release is a full and complete
waiver of all claims, including (without limitation) claims to attorneys' fees
or costs, claims of wrongful discharge, constructive discharge, breach of
contract, breach of the covenant of good faith and fair dealing, harassment,
retaliation, discrimination, violation of public policy, defamation, invasion of
privacy, interference with a leave of absence, personal injury, fraud or
emotional distress and any claims of discrimination or harassment based on sex,
age, race, national origin, disability or any other basis under Title VII of the
Civil Rights Act of 1964, the Fair Labor Standards Act, the Equal Pay Act of
1963, the Americans With Disabilities Act, the Civil Rights Act of 1866, the Age
Discrimination in Employment Act of 1967 (ADEA), the California Labor Code, the
California Fair Employment and Housing Act, the California Family Rights Act,
the Family Medical Leave Act or any other federal, state, municipal or local law
or regulation relating to employment or employment discrimination. Mittal
further understands and agrees that this waiver includes all claims, known and
unknown, to the greatest extent permitted by applicable law.

      2. Mittal also hereby agrees that nothing contained in this Release shall
constitute or be treated as an admission of liability or wrongdoing or of any
violation of law by the Releasees or Mittal.

      3. In addition, Mittal understands that he is releasing potentially
unknown claims, and that Mittal has limited knowledge with respect to some of
the claims being released. Mittal acknowledges that there is a risk that, after
signing this Release, Mittal may learn information that might have affected
Mittal's decision to enter into this Release. Mittal assumes this risk and all
other risks of any mistake in entering into this Release. Mittal agrees that
this Release is fairly and knowingly made and expressly waives and releases any
and all rights and benefits under Section 1542 of the California Civil Code (or
any analogous law of any other state), which states as follows:

                  A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
            DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
            EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
            AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
<PAGE>
      4. Mittal agrees that he will never, individually or with any other
person, commence, aid in any way (except as required by legal process) or
prosecute, or cause or permit to be commenced or prosecuted, any action or other
proceeding based on any claim that is the subject of this Release.

      5. If any provision of this Release is found to be unenforceable, it shall
not affect the enforceability of the remaining provisions and the court shall
enforce all remaining provisions to the full extent permitted by law.

      6. This Release and the Letter Agreement, including the agreements or
provisions within agreements specified in the Letter Agreement as remaining in
full force and effect, constitute the entire agreement between Mittal and
Releasees with regard to the subject matter of this Release. They supersede any
other agreements, representations or understandings, whether oral or written and
whether express or implied, which relate to the subject matter of this Release.
Mittal understands and agrees that this Release may be modified only in a
written document signed by Mittal and a duly authorized member of the Company's
Board of Directors (other than himself).

      7. Mittal agrees that the Company shall have no duty to provide to Mittal
any severance benefits described in the Letter Agreement unless and until Mittal
has returned to the Company any and all of the Company's property in Mittal's
possession or under Mittal's control (including, but not limited to, keys;
credit cards; access badges; the Company files or documents, including copies
thereof; or facsimile machines, except as allowed by his tenure as CTA or member
of the Company's Board of Directors), except that Mittal may retain certain
personal items described in Section 5 of the Letter Agreement.

      8. This Release shall be construed and interpreted in accordance with the
laws of the State of California.

      9. Mittal understands that Mittal has the right to consult with an
attorney before signing this Release. Mittal also understands that, as provided
under the Older Workers Benefit Protection Act of 1990, Mittal has 21 days after
receipt of this Release to review and consider this Release, discuss it with an
attorney of Mittal's own choosing, and decide to execute it or not execute it.
Mittal also understands that Mittal may revoke this Release during a period of
seven days after Mittal signs it and that this Release will not become effective
for seven days after Mittal signs it (and then only if Mittal does not revoke
it). In order to revoke this Release, within seven days after Mittal executes
this Release, Mittal must deliver to Mike Lyons, a member of the Company's Board
of Directors, a letter stating that he is revoking it.

      10. Mittal understands that if Mittal chooses to revoke this Release
within seven days after Mittal signs it, Mittal will not receive any of the
severance benefits set forth in the Letter Agreement and the Release will have
no effect.

      11. Mittal agrees not to disclose to others the terms of this Release,
except that Mittal may disclose such information (a) to Mittal's spouse and to
Mittal's attorney or accountant in order for such attorney or accountant to
render services to Mittal related to this Release, (b) in
<PAGE>
      12. response to a subpoena or other legal process requiring said
disclosure, or (c) that is in the public domain other than through Mittal's act
or acts in violation of this Agreement.

      13. Mittal states that before signing this Release, Mittal:

            -     Has read it,

            -     Understands it,

            -     Knows that he is giving up important rights,

            -     Is aware of his right to consult an attorney before signing
                  it, and

            -     Has signed it knowingly and voluntarily.



Date:
      ---------------------   ------------------------------------------
                              Signature

                              ------------------------------------------
                              Print Full Name
<PAGE>
                                    EXHIBIT B

           Proprietary Information and Inventions Agreement
<PAGE>
                                    EXHIBIT C
                            Indemnification Agreement