Sample Business Contracts

Separation and Severance Agreement - RSI Systems Inc. and Donald C. Lies

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     THIS SEPARATION AND SEVERANCE AGREEMENT (the "Agreement") is made and
entered into this 7th day of September, 1999, by and between RSI Systems, Inc.,
a Minnesota corporation ("Employer"), and Donald C. Lies, a Minnesota resident

     WHEREAS, Employee has been employed by Employer as its Chief Executive
Officer; and

     WHEREAS, the parties agree that it is in their respective best interest to
sever the employment relationship between them, upon the terms and conditions
set forth herein.

     NOW, THEREFORE, in consideration of the recitals and the mutual
representations, warranties, covenants, agreements and promises made herein, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:

     1. RESIGNATION. The parties hereby agree that Employee hereby resigns as a
director, officer and employee of Employer, all to be effective as of September
7, 1999.

     2. SEVERANCE PAYMENTS. The parties hereby agree that Employer shall pay the
Employee one of the following severance amounts. Employer shall choose the
severance payments of paragraph (a) or (b) below on or before September 15, 1999
and shall notify Employee promptly in writing of the choice of severance

     (a)  Employer shall pay Employee the lump sum of $166,666.70, constituting
          10 months of Employee's salary in effect at the date hereof, subject
          to applicable withholding; or

     (b)  Employer shall pay Employee severance each two weeks in accordance
          with Employee's normal pay periods, beginning September 15, 1999 and
          ending on August 31, 2000 at the rate of $7,692.31. All such monthly
          severance payments shall be made in accordance with the normal payroll
          times, and procedures, of the Employer, and shall be subject to all
          customary payroll withholdings and deductions, including deductions
          for any benefits provided in this Agreement.

     3. CONTINUATION OF HEALTH COVERAGE. The Employer agrees to allow Employee
(and any currently covered dependents) to continue to participate in a
health/medical plan of, or reasonably comparable to that maintained from time to
time by Employer for its employees at Employee's cost. Employee's right to
continued coverage under this section shall in no way reduce or limit any
continuation coverage under such group health plan to which Employee or any of
Employee's qualified beneficiaries are entitled under the provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") or Minnesota
Statutes " 61A.092 and 62A.17 et seq. This extension of coverage, however, shall
be coordinated with, and shall be provided concurrently with, any benefits or
continuation rights otherwise available to Employee


and Employee's eligible dependents under state or federal continuation of
coverage statutes, including but not limited to, Minnesota Statutes " 61A.092
and 62A.17 et seq. and the federal Consolidated Omnibus Budget Reconciliation
Act ("COBRA"). Accordingly, within ten (10) days after the date of termination,
Employee and Employee's dependents who are eligible for such statutory
continuation rights shall complete all forms and papers necessary and customary
to elect such continuation coverage. The Parties expressly agree that the
extension of benefits provided for by this Agreement is not intended to create a
retiree health plan covering any other employees. In all other respects, the
payment of benefits, including the amounts and timing thereof, to Employee and
Employee's eligible dependents will be governed by the terms of applicable
employee benefit plans for which Employee and Employee's dependents are
eligible. The Company will answer any reasonable questions that Employee may
have from time to time and will offer him the same assistance given other
participants in employee benefit plans so long as Employee is entitled to
benefits as provided herein or under the terms of those plans.

     4. EMPLOYEE TO ACT AS ADVISOR. Employee agrees that for a period of three
months commencing on the date of this Agreement, Employee shall make himself
available to act in an advisory capacity for Employer in connection with various
areas of Employer's business, including advising Employer on a search for a new
Chief Executive Officer. Employee's obligations hereunder shall not include any
reporting time at the Company's facilities or any fixed amount of time devoted
to such advisory role. Employee shall, however, comply with reasonable requests
by Employer for advice.

     5. NONCOMPETITION COVENANT. In consideration of the Employer entering into
this Agreement, and agreeing to make the payments contained herein, Employee
hereby agrees that, until August 31, 2000, the Employee shall not, directly or
indirectly, whether as owner, manager, operator, controlling person, employee,
advisor or consultant, engage in the business of manufacturing, selling or
servicing videoconferencing equipment or any other business competitive with the
business conducted by Employer on the date hereof, anywhere within the United
States. In the event of a breach by Employee of the restrictions contained in
this paragraph 5, the Employee hereby agrees that, as liquidated damages and not
as a penalty, the Employee shall be forfeit, and the Employer shall not be
obligated to pay, any amount then remaining unpaid to Employee under paragraph 2
of this Agreement. In addition, and not in limitation, to the specific remedy
provided in the preceding sentence, the Employer shall further be entitled to
enforce this restrictive covenant against the Employee through such remedies as
a court of equity can provide including, without limitation, the remedy of
injunction and specific performance.

     6. RELEASE FROM PERSONAL GUARANTIES. The parties acknowledge that Employee
has personally guaranteed the Employer's indebtedness to Employer's principal
lender. Employer agrees to exercise reasonable efforts to obtain the release of
Employee from such personal guaranty; provided, however, that such efforts shall
not require the renegotiation of such indebtedness, pay down of any outstanding
amounts or the payment of any fee. Employer agrees to indemnify, defend and hold
harmless Employee from and against any demand, liability, suit, claim or cause
of action, and any associated costs and expenses (including reasonable


fees and disbursements) incurred by Employee after the date hereof as a result
of Employee's personal guaranty of such indebtedness.

     7. GENERAL RELEASE OF EMPLOYER. In consideration of the payments, benefits,
and other undertakings stated herein, Employee agrees to release and forever
discharge Employer from any and all claims by signing a separate Release in the
form attached hereto as EXHIBIT A, which is incorporated herein by reference, at
the time Employee signs this Agreement.

     8. 401(K) BENEFITS. Employer acknowledges that in addition to the payments
and benefits Employee is receiving under this Agreement, Employee is also
entitled to the benefits, if any, available under the Employer's 401(k) profit
sharing and savings plan.

     9. CONFIDENTIAL INFORMATION. Employee agrees that Employee will not use or
disclose any information owned by, developed by, for, or about Employer, in any
respect concerning or relating to Employer's business, or the business of any of
its clients or customers, that Employee has acquired during Employee's
employment by Employer ("Confidential Information"). Employee agrees not to use
such Confidential Information himself or disclose such information to any other
party, directly or indirectly, without the prior written consent of Employer.
Employee agrees to return to Employer any and all of Employer's property in
Employee's possession.

     10. NON-ADMISSION. Nothing in this Agreement is intended to be, nor will it
be deemed to be, an admission of liability by Employer that it has violated any
state or federal statute, local ordinance, or principle of common law, or that
it has engaged in any wrongdoing whatsoever. Employee acknowledges that Employer
has entered into this Agreement as a compromise to terminate all controversy
and/or claims by or regarding Employee.

     11. NON-DISPARAGEMENT. Employee agrees not to disparage Employer in any way
to any person or entity whatsoever, including but not limited to past, present,
and prospective employees, customers, clients, vendors, and suppliers of
Employer. Employer agrees that it shall not, and it shall cause its officers,
directors and employees not to, disparage Employee in any way to any person or
entity whatsoever.


          (a) MERGER. This Agreement and the attached Release, and the employee
     benefit plans in which Employee is a participant, supersede all prior oral
     and written agreements, negotiations, commitments, statements, and
     communications between the parties with respect to the subject matter
     hereof including, without limitation, the Deferred Compensation Agreement.

          (b) INVALIDITY. In case any one or more of the provisions of this
     Agreement shall be invalid, illegal or unenforceable in any respect, the
     validity, legality, and enforceability of the remaining provisions
     contained in this Agreement will not in any


     way be affected or impaired thereby.

          (c) BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding upon
     Employee's heirs and legal representatives and shall be enforceable by the
     successors and assigns of Employer. None of the rights or obligations under
     this Agreement shall be assigned or transferred by Employee.

          (d) GOVERNING LAW AND VENUE. This Agreement shall be construed and
     interpreted in accordance with the substantive and procedural laws of the
     State of Minnesota and any dispute arising herefrom shall be venued in
     Hennepin County, State of Minnesota.

          (e) COUNTERPARTS. This Agreement may be executed simultaneously in two
     (2) or more counterparts, each of which will be deemed an original, but all
     of which together will constitute one and the same instrument.

     IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of the date and year first written above.

                                      RSI SYSTEMS, INC.


                                      Donald C. Lies


                                    EXHIBIT A

1.   DEFINITIONS. I intend all words used in this Release to have their plain
     meanings in ordinary English. Technical legal words are not needed to
     describe what I mean. Specific terms I use in this Release have the
     following meanings:

     a.   "I" "me" and "my", as used herein, shall at all times mean Donald C.
          Lies and anyone who has or obtains any legal rights or claims through
          said named person.

     b.   "Employer", as used herein, shall at all times mean RSI Systems, Inc.,
          its parent corporations, subsidiaries, successors and assigns,
          partners, any affiliated and predecessor companies, their affiliated
          and predecessor or management companies, their successors and assigns,
          and the present and former officers, directors, shareholders,
          partners, employees, attorneys, and agents of any of them, whether in
          their individual or official capacities, and the current and former
          trustees or administrators of any pension, welfare, or other employee
          benefit plan of Employer, in their official and individual capacities.

     c.   "My Claims" mean all of the claims I have now against Employer,
          whether or not I know about those claims, including but not limited
          to, claims for any action or inaction, loss, expense, or any damages
          of whatever nature arising from any occurrence or occurrences from the
          beginning of time until the date of this Release, including claims
          for: breach of contract; payment of wages, commissions,
          reimbursements, sick pay, vacation pay, employee benefits, insurance,
          pension, or other compensation; fraud or misrepresentation; violation
          of any federal, state, and/or local law, regulation or rule, including
          but not limited to, the Minnesota Human Rights Act, Title VII of the
          Civil Rights Act of 1964, the Americans with Disabilities Act, the
          Rehabilitation Act, the Age Discrimination in Employment Act, the
          Employee Retirement Income Security Act, the Consolidated Omnibus
          Budget Reconciliation Act, the Family and Medical Leave Act, the Fair
          Labor Standards Act, the Worker Adjustment and Retraining Notification
          Act, and all other federal, state, and/or local civil rights laws
          prohibiting discrimination or other unlawful activity on the basis of
          race, color, creed, marital status, sex, age, religion, national
          origin, disability, pregnancy, sexual orientation, political
          affiliation, status with respect to public assistance, membership in
          local commission, or any other protected class status; sexual
          harassment; retaliation; defamation; intentional or negligent
          infliction of emotional distress; breach of the covenant of good faith
          and fair dealing; promissory estoppel; unjust enrichment; negligence;


          termination of employment; constructive discharge; invasion of
          privacy; fraudulent inducement; negligent hiring, retention, training,
          and/or supervision; all other claims for unlawful employment
          practices; all claims for attorney's fees, costs, disbursements, fees,
          or other payments; and all other common law, legal, equitable or
          statutory claims (whether on a contract, tort, or other theory),
          whether they could be brought directly by me on my own behalf or by
          any other person, agency, or organization on my behalf.

2.   AGREEMENT TO RELEASE MY CLAIMS. On behalf of myself, my attorneys, heirs,
     executors, administrators, successors and assigns, I agree to release,
     discharge, and give up all My Claims against Employer in exchange for the
     compensation, promises and undertakings as described in the Separation and
     Severance Agreement between me and Employer. I agree to release and
     discharge Employer not only from any and all of My Claims that I could make
     on my own behalf, but also from those claims that may or could be brought
     by any other person or organization on my behalf. I have not caused or
     permitted to be served, filed, or commenced, and I will not cause or permit
     to be served, filed, or commenced, any lawsuits, charges, complaints,
     actions, notices, or other demands against Employer with any federal,
     state, or local judicial or administrative agency or body based on My
     Claims. In the event any such claim has been or is asserted, I agree that
     this Release shall act as a total and complete bar to my re-employment or
     to recovery of any relief or sum or amount whatsoever from Employer,
     whether labeled award, liability, damages, judgment, backpay, wages, fine,
     or penalty, or otherwise resulting directly or indirectly from any lawsuit,
     remedy, charge, or complaint, whether brought privately by me or by anyone
     else, including any federal, state, or local judicial or administrative
     agency or body, whether or not on my behalf or at my request. The payments
     I am receiving represent full and fair compensation for the release of all
     My Claims. Employer shall not be obligated and does not owe me anything in
     addition to that described above. THIS RELEASE SHALL NOT AFFECT ANY CLAIMS

3.   NON-ADMISSION. Even though Employer is paying me to release My Claims,
     Employer does not admit that it is responsible or legally obligated to me.
     In fact, Employer denies that it is responsible or legally obligated to me
     or that it has engaged in any wrongdoing.

     take up to twenty-one (21) calendar days after receiving the Separation and
     Severance Agreement and this Release to consider whether I wish to sign the
     Separation and Severance Agreement and this Release. In addition, I
     understand that I may rescind (i.e., revoke and cancel) my release of
     claims arising under the federal Age Discrimination in Employment


     Act, 29 U.S.C. ' 621 et seq., within seven (7) calendar days of signing the
     Separation and Severance Agreement and this Release. I understand that I
     also may rescind (i.e., revoke and cancel) my release of claims arising
     under the Minnesota Human Rights Act within fifteen (15) calendar days of
     signing the Separation and Severance Agreement and this Release. I
     understand that to be effective, the rescission/revocation must be in
     writing and delivered to Employer, in care of James Hanzlik, either by hand
     or by mail within the respective rescission/revocation periods. If sent by
     mail, the rescission must be:

     1.   Postmarked within the respective rescission/revocation periods as
          stated above;

     2.   Properly addressed, as stated above; and

     3.   Sent by certified mail, return receipt requested.

5.   Knowing and Voluntary. I have read the Separation and Severance Agreement
     and this Release carefully and understand and agree to all of their
     respective terms. I have had an opportunity to discuss this Release with my
     own attorney. In agreeing to sign the Separation and Severance Agreement
     and this Release, I have not relied on any statements or explanations made
     by Employer or its attorneys.

                                           Donald C. Lies

this ____ day of September, 1999.

Notary Public