Exhibit 10.4
SEPARATION AND NON-COMPETE
AGREEMENT AND MUTUAL RELEASE
This Separation and Non-Compete
Agreement and Mutual Release (“Agreement”) is made and
entered into effective as of June 2, 2005 (“Effective
Date”), by and between John J. Coughlan, a Minnesota resident
(“Employee”) and Lawson Software, Inc., a Delaware
corporation (Lawson Software, Inc. and its subsidiaries are
referred to as the “Company”).
Background
A.
On June 2, 2005, the Company
publicly announced that: (1) it intends to acquire all
of the outstanding capital stock of Intentia International AB
(“Intentia”) (the “Intentia Transaction”)
and (2) the Company has named a new chief executive officer of
the Company (the “New CEO”);
B.
Subject to the terms of this
Agreement, Employee will continue as the current chief executive
officer of the Company (“CEO”) for the time period
described below;
C.
Subject to the terms of this
Agreement, the Company will pay Employee the severance benefits
described below; and
D.
Subject to the terms of this
Agreement, Employee will not compete with the Company (for the time
period and to the extent described in Section 4 below), and
Employee and the Company agree to the mutual release,
indemnification and other provisions described below.
Agreement
NOW, THEREFORE, in consideration of
the mutual promises and covenants established in this Agreement,
Employee and the Company agree as follows:
1.
Definitions
. In addition to the other
capitalized terms used in this Agreement, the following capitalized
terms have the respective meanings defined below:
1.1
Cause . “Cause” means fraud or
criminal conduct in connection with the Company’s business,
unless Employee was directed by a director or executive officer of
(or a superior within) the Company to engage in such fraud or
conduct
1.2
Planned Full-Time Employment
Period .
“Planned Full-Time Employment Period” means the time
period commencing on the Effective Date of this Agreement and
ending on June 30, 2005.
1.3
Full-Time Employment
Period .
“Full-Time Employment Period “ means the time period
commencing on the Effective Date of this Agreement and ending on
the earlier of:
(a)
the end of the Planned Full-Time
Employment Period;
(b)
Employee’s death or total
disability;
(c)
termination of Employee by the
Company for Cause;
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(d)
Employee’s material breach of
this Agreement that is not cured within five business days after
written notice describing the breach; or
(e)
voluntary resignation of Employee as
CEO, unless such resignation is due to Company’s material
breach of this Agreement that is not cured within five business
days after written notice describing the breach.
1.4
Part-Time Employment
Period .
“Part-Time Employment Period “ means the time period
commencing at the end of the Full-Time Employment Period and ending
on the earlier of:
(a)
two years after the end of the
Planned Full-Time Employment Period;
(b)
voluntary resignation of Employee as
a part-time employee of the Company (unless such resignation is due
to Company’s material breach of this Agreement that is not
cured within five business days after written notice describing the
breach);
(c)
termination of Employee by the
Company for Cause; or
(d)
Employee’s material breach of
this Agreement that is not cured within five business days after
written notice describing the breach (unless preceded by or
simultaneous with Company’s material breach of this Agreement
that is not cured within five business days after written notice
describing the breach).
1.5
Employment Period
. “Employment
Period” means the time period commencing on the Effective
Date of this Agreement and ending on the latter of the end of the
Full-Time Employment Period or the end of the Part-Time Employment
Period.
2.
Employment and Employee
Obligations .
2.1
Full-Time Employment With the
Company .
Throughout the Full-Time Employment Period, Employee shall be a
full-time employee of the Company, reporting to the Company’s
Board of Directors. Unless otherwise instructed by the
Company’s Board of Directors, throughout the Full-Time
Employment Period Employee shall continue to provide
Employee’s full-time, good faith efforts towards the success
of the Company (consistent with Employee’s past practices)
and the transition to a new chief executive officer.
2.2
Resignation as an Officer and
Director of the Company . Employee hereby confirms that Employee
will be deemed to have voluntarily resigned as CEO, president, an
executive officer and as a director of the Company effective as of
June 14, 2005.
2.3
Employee Invention and
Non-Disclosure Agreement . Exhibit A to this Agreement is
substantially the same form of the Employee Invention and
Non-Disclosure Agreement as previously entered into between the
Company and Employee, which will continue in effect pursuant to its
terms (except that Employee’s employment with the Company
will no longer be “at will,” but will instead be
governed by this Agreement; and except that the terms of
Section 4 of that agreement will no longer apply and is
instead superseded by the terms of Section 4 of this
Agreement).
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2.4
Surrender of Records and
Property . Promptly
after the end of the Full-Time Employment Period, Employee shall
deliver to the Company’s General Counsel all Company records
and property possessed by Employee, except that Employee may
permanently keep Employee’s Blackberry and laptop
computer.
2.5
Part-Time Employment With the
Company .
Throughout the Part-Time Employment Period, Employee shall be a
part-time employee of the Company, reporting to the New CEO, and
available on a part-time basis and compensated by the Part-Time
Salary under Section 3.21 below. Said part-time
employment shall include but not be limited to the following:
(1) periodic and regular consultation with and advice to the
New CEO and/or other members of senior management of the Company;
(2) sharing of historical and learned knowledge and
information regarding the Company; and (3) additional duties
to which Employee and the New CEO mutually agree (provided that if
said additional duties exceed the currently contemplated scope of
Employee’s part-time employment, then those additional duties
or services will be subject to Employee’s availability and at
an additional hourly rate to be mutually agreed to between Employee
and the New CEO). The Company agrees that it shall use its
reasonable efforts to continue and maintain said part-time
employment throughout the duration of the Part-Time Employment
Period, and, except pursuant to Sections 1.4(c) or (d), the
Company shall not take (or refuse to take) actions that deprive
Employee of continued part-time employment status during the
Part-Time Employment Period. During the Part-Time Employment
Period, Employee shall not be required to incur any expenses for
Company business. If the New CEO requests that Employee
travel or incur other expenses during the Part-Time Employment
Period, the Company shall reimburse Employee for those
expenses.
2.6
Cooperation
. As a current or former
executive officer of the Company, during and after the end of the
Employment Period, Employee agrees to cooperate with the Company in
the investigation, discovery and litigation of any employment
claims or other Company legal matters. In consideration of
such cooperation: (1) the Company will reimburse
Employee for Employee’s reasonable out-of-pocket expenses
incurred at the request of the Company, (2) the Company will
compensate Employee (as an independent contractor if Employee is
not employed by the Company at that time) for the reasonable time
incurred at the request of the Company, at a reasonable hourly rate
and (3) the Company will indemnify and defend Employee, in
connection with such cooperation, to the same extent as if Employee
had continued to be an employee and officer of the
Company.
2.7
ADEA Report
. Employee acknowledges that
concurrently with the signing of this Agreement, Employee has
received a copy of the ADEA report concerning the
Company.
3.
Compensation, Benefits and
Severance .
3.1
Compensation Through the End of
the Full-Time Employment Period. In accordance with the Company’s normal
payroll practices, from the Effective Date of this Agreement
through the end of the Full-Time Employment Period, the Company
shall pay Employee Employee’s current full-time base salary,
less applicable taxes.
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3.2
ELRP Bonus Plan
. If there any payouts under
the Company’s Executive Leadership Results Plan
(“ELRP”) for the fiscal year ended May 31, 2005
(“FY05”), Employee shall receive a payout (less
applicable taxes) to the full extent earned and accrued under the
terms of the ELRP for FY05 (the payout date will be governed by the
ELRP). If there are no payouts under the ELRP for FY05,
Employee will not receive any ELRP payouts or other bonuses for
FY05. Employee will not be eligible to receive any bonus or
other incentive compensation for the fiscal years ending
May 31, 2006, 2007 or 2008 (or for any fiscal quarter during
those years) under the ELRP or any other bonus plan or
program.
3.3
Benefits . Throughout the Full-Time Employment
Period, Employee shall continue to be eligible to receive the
full-time benefits made available by the Company to U.S. employees
working full-time, including without limitation the continued
participation in the Company’s tax-qualified retirement
plan.. Employee shall not be eligible to receive any benefits
during the Part-Time Employment Period.
3.4
Initial Release
. In consideration of the
severance payments to be made by the Company to Employee pursuant
to Sections 3.5 and 3.6 below, at the end of the Full-Time
Employment Period pursuant to Sections 1.3(a) or
(b) above, Employee will sign and deliver to the Company the
“Initial Release” in the form attached as
Exhibit B.
3.5
Severance Based On One Times
Annual Base Salary . If the Full-Time Employment Period ends
pursuant to Sections 1.3(a) or (b) above, and Employee
(or Employee’s estate or legal representative in the case of
Section 1.3(b)) has signed and delivered the Initial Release
to the Company (and not rescinded that release), then promptly
after the 15-day rescission period described in Section VII of
the Initial Release, the Company shall pay Employee $450,000.00,
less applicable taxes (that $450,000 payment represents one times
annual base salary and is in consideration of the release described
in Section II.A of the Initial Release). The $450,000
payment described in this Section 3.5 will be paid in a lump
sum (less applicable taxes) at the end of the first full payroll
period following the 15-day rescission period.
3.6
Severance Based On One Times
Annual Target Bonus . If the Full-Time Employment Period ends
pursuant to Sections 1.3(a) or (b) above, and Employee
(or Employee’s estate or legal representative in the case of
Section 1.3(b)) has signed and delivered the Initial Release
to the Company (and not rescinded that release), then promptly
after the 15-day rescission period described in Section VII of
the Initial Release, the Company shall pay Employee $550,000.00,
less applicable taxes (that $550,000 payment represents one times
annual target bonus and is in consideration of the release
described in Section II.B of the Initial Release). The
$550,000 payment described in this Section 3.6 will be paid in
a lump sum (less applicable taxes) at the end of the first full
payroll period following the 15-day rescission period.
3.7
No Claw-Back for Other
Employment .
Employee shall not be obligated to payback any portion of the
severance payments made pursuant to Sections 3.5 or 3.6 above if
Employee accepts employment with another employer.
3.8
COBRA Coverage
. Employee (and his
dependents) shall be eligible to and may elect COBRA continuation
coverage under the Company’s health plans
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commencing on the first day of the
month following the end of the Full-Time Employment Period (the
“COBRA Start Date”). The Company shall pay the
employer’s share (but not Employee’s share) of COBRA
medical and dental premiums for Employee and his dependents up to
eighteen (18) months after the COBRA Start Date if all of the
following conditions are met: (1) Employee makes a
timely election for COBRA continuation, (2) the Full-Time
Employment Period ends pursuant to Sections 1.3(a) or
(b) above; and (3) Employee has signed and delivered the
Initial Release to the Company (and not rescinded that
release). Notwithstanding the foregoing, nothing in this
Agreement shall prejudice the rights. that Employee and his
dependents may have to elect and enjoy COBRA continuation
coverage.
3.9
Outplacement
Assistance .
Throughout the first twelve (12) months after the end
of the Full-Time Employment Period, the Company will make available
to Employee outplacement assistance valued at up to $25,000, using
an outplacement firm selected by Employee. The Company will
use reasonable efforts to structure the outplacement through the
Company to minimize any adverse tax consequences to Employee on
that payment. The outplacement payments under this
Section 3.9 are payable only to the extent that the actual
outplacement fees are actually incurred.
3.10
Stock Options
. The stock options previously
granted to Employee (“Options”) for the purchase of
shares of common stock of the Company, are governed by the terms of
the applicable Stock Incentive Plan and Grant Notice or Option
Agreement delivered to Employee when the Options were granted
(collectively, the “Option Documents”).
(a)
No Amendment of 1999/2000
Options . The
Options granted to Employee on September 29, 1999 and
March 9, 2000 at an exercise price of $2.2471 per share (the
“1999/2000 Options”) are fully vested and expire on the
earlier of (i) ninety (90) days after the end of the
Employment Period (or one (1) year after Employee’s
death or total disability), or (ii) ten (10) years after
grant. The terms of the 1999/2000 Options are not amended by
this Agreement.
(b)
No Further Vesting of 2002-05
Options After End of Full Time Employment Period
. The term “2002-05
Options” collectively means all Options granted to Employee
on or after July 15, 2002. Notwithstanding any provision
in the Option Documents to the contrary: (i) none of the
2002-05 Options will vest after the end of the Full-Time Employment
Period and (ii) as of the close of business at the end of the
Full-Time Employment Period all unvested 2002-05 Options will be
deemed terminated and cancelled.
(c)
Amendment of Under-Water 2002-05
Options . If
the closing price of the Company’s common stock (Nasdaq
symbol: LWSN) on the trading day immediately preceding the
Effective Date of this Agreement is less than the respective
exercise price of any of the 2002-05 Options (those Options are
collectively referred to as the “Under-Water 2002-05
Options”), the Under-Water 2002-05 Options are hereby amended
as follows as of the Effective Date: notwithstanding any
provision in the Option Documents to the contrary, the Under-Water
2002-05 Options that are vested as of the end of the Full-Time
Employment Period may be exercised for two years after the end of
the Full-
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Time Employment Period regardless of
whether or not Employee is employed by the Company.
(d)
Minimum Period
. With respect to this
Section 3.10 of this Agreement, and notwithstanding anything
herein to the contrary, if at any time during the Employment Period
Employee’s status as an employee of the Company (including
but not limited to as a part-time employee) is determined to be
invalid by a governmental, judicial or other legal enforcement
authority, Employee shall have a minimum of ninety (90) days
immediately following the effective date of such determination in
which to exercise those 1999/2000 Options and/or the 2002-05
Options (including without limitation the Under-Water Options)
which are vested and unexercised at that time.
(e)
No Obligation to
Notify . The
Company and Salomon Smith Barney are not obligated to provide
Employee future reminders of these stock option dates.
3.11
Non-Payment of Severance, COBRA
or Outplacement .
Notwithstanding any provision in this Agreement to the contrary, if
the Full-Time Employment Period ends pursuant to Sections 1.3(c),
(d) or (e) above, then: (1) no severance
payments shall be payable to Employee under Sections 3.5, 3.6 or
3.22 above, (2) no COBRA payments shall be payable by the
Company pursuant to Section 3.8 above, and (3) no
outplacement payments shall be payable by the Company pursuant to
Section 3.9 above and (4) there shall be no Part-Time
Employment Period. Notwithstanding the foregoing, nothing in
this Agreement shall prejudice the rights that Employee and his
dependents have to elect and enjoy COBRA continuation
coverage.
3.12
Insider Trading
Blackout . Employee
shall continue to comply with the Company’s Insider Trading
Policy until the end of the Full-Time Employment Period.
Employee is currently under a trading restriction for the
Company’s stock because of the pending Intentia Transaction
(the “Intentia Transaction Blackout”). If at any
time before the Full-Time Employment Period ends, Employee
possesses material nonpublic information about the Company,
Employee shall continue to comply with applicable securities laws
that restrict trading in Company stock based on that
information.
3.13
No Intentia Transaction
Lockup . The share
lockup in the Intentia Transaction does not apply to
Employee.
3.14
Form 4 and Form 144
Filings with SEC .
If Employee has not made any non-exempt purchases of Company stock
during the six months before the end of the Full-Time Employment
Period, no further Form 4 filings will be required for
Employee after the end of the Full-Time Employment Period (other
than as required by applicable law).During the 90-days after the
end of the Full-Time Employment Period, Employee must file a
Form 144 with the SEC for any sales of Company stock in
Employee’s 401(k) plan account.
3.15
Flexible Time Off
(FTO) . All earned
but unused FTO through the end of the Full-Time Employment Period
will be paid out to Employee after the end of the
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Full-Time Employment Period,
pursuant to the Company’s normal payroll practices. No
FTO shall accrue after the end of the Full-Time Employment
Period.
3.16
Business Expense
Reimbursement . The Company shall reimburse Employee for
all employment-related expenses, consistent with past practices,
through the end of the Full-Time Employment Period. Employee
must submit the necessary requests for reimbursement within 30 days
after the end of the Full-Time Employment Period, and through the
end of the Part-Time Employment Period, if such expenses are
incurred in accordance with Section 2.5. Employee shall
not be obligated to reimburse the Company for any club memberships
previously paid for by the Company.
3.17
Termination of Umbrella Personal
Liability Insurance Coverage . The Company previously made
available to Employee, as an executive officer and director of the
Company, $15 million of umbrella personal liability
insurance. That umbrella personal liability insurance will be
cancelled as of the end of the Full-Time Employment Period.
Notwithstanding the foregoing, nothing in this Section 3.17
shall in any way limit the full benefit to Employee of
Section 8 of this Agreement.
3.18
Ayco Personal Financial Planning
Services . As CEO,
Employee has received personal financial planning services from
Ayco at the Company’s expense (the “Ayco
Services”). The Company has paid the fees for the Ayco
Services through June 30, 2005 and will not seek a refund of
those fees. The Company shall pay Ayco’s expenses
incurred before July 1, 2005. Employee shall pay any
Ayco fees or expenses incurred after June 30, 2005 on behalf
of Employee.
3.19
Termination of Employment
Agreement . The
Employment Agreement dated February 15, 2001 between the
Company and Employee is hereby terminated in its entirety and shall
have no further force or effect.
3.20
No Participation in Change in
Control Severance Pay Plan . On January 17, 2005, the Company
adopted the Executive Change in Control Severance Pay Plan for Tier
1 Executives (the “Tier 1 Plan”). Under the Tier
1 Plan, if the employment of a Tier 1 executive ( e.g . the
chief executive officer and his or her direct reports) is
terminated within two years after a “Change in Control”
of the Company (as defined in the Tier 1 Plan), the Tier 1
executive may be eligible to receive as severance two times annual
base salary and two times the average annual bonus over the
preceding three years. Employee acknowledges that this
Agreement supersedes the Tier 1 Plan and that if a Change in
Control of the Company occurs at any time, Employee will not be
eligible for any payments under the Tier 1 Plan.
3.21
Compensation During the Part-Time
Employment Period .
Throughout the Part-Time Employment Period, the Company shall pay
Employee a part-time salary of $1,000.00 per month, less applicable
taxes, in accordance with the Company’s normal payroll
practices (the “Part-Time Salary”).
3.22
Final Release
. In consideration of the
$1,000 severance payment (less applicable taxes) to be made by the
Company to Employee pursuant to the “Final Release” in
the form attached as Exhibit C, at the end of the Part-Time
Employment Period pursuant to Sections 1.4(a) or
(b) above (and after the end of the 15-day
rescission
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period in Section VI of the
Final Release), Employee will sign and deliver to the Company the
Final Release.
3.23
No Other Compensation or
Payments . Except
to the extent expressly set forth in this Agreement, Employee is
not eligible to receive at any time any compensation, severance or
other payments from the Company. For example, the
compensation and severance arrangements between the Company and the
New CEO shall not in any way cause (or serve as a precedence for)
the increase or decrease in any amounts to be paid to
Employee.
3.24
Gross-Up Payment
.
(a) Anything in this Agreement
to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or
for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 3.24) (a
“Payment”) would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”) or any interest or penalties are
incurred by the Employee with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise
Tax”), then the Employee shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount
such that after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payment.
(b) All determinations required
to be made under this Section 3.24, including whether and when
a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Accounting Firm which shall
provide detailed supporting calculations both to the Company and
the Employee within 15 business days after the receipt of notice
from the Employee that there has been a Payment, or such earlier
time as is requested by the Company. The determination of tax
liability made by the Accounting Firm shall be subject to review by
the Employee’s tax advisor, and, if the Employee’s tax
advisor does not agree with the determination reached by the
Accounting Firm, then the Accounting Firm and the Employee’s
tax advisor shall jointly designate a nationally recognized public
accounting firm which shall make the determination. All fees
and expenses of the accountants and tax advisors retained by both
the Employee and the Company shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this
Section 3.24, shall be paid by the Company to the Employee
within five days after the receipt of the determination. Any
determination by such jointly designated public accounting firm
shall be binding upon the Company and the Employee. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination hereunder, it
is possible that a Gross-Up Payment will not have been made by the
Company that should have been made (an “Underpayment”),
consistent with the calculations required to be made
hereunder. In the event that the Employee hereafter is
required to make a payment of any Excise Tax, any such
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Underpayment shall be promptly paid
by the Company to or for the benefit of the Employee. Upon
notice by the Employee of any audit or other proceeding that may
result in a liability to the Company hereunder, the Employee shall
promptly notify the Company of such audit or other proceeding; and
the Company may, at its option, but solely with respect to the item
or items that relate to such potential liability, choose to assume
the defense of such audit or other proceeding at its own
cost,
