Exhibit 10.40
EXECUTION VERSION
SEPARATION AND RELEASE
AGREEMENT
I, John R. Zavoli
(“Employee,” “me” or “I”),
understand that my position with American Technology Corporation
(the “Company”) was terminated effective
August 17, 2006 (the “Separation
Date”).
The Company has agreed that in
exchange for my signature on this Agreement and the promises and
covenants herein, the Company will provide me with the following
severance benefits (the “Benefits”): (1) a
severance amount equal to five months salary, or $104,166.67, the
portion of which would have otherwise been paid as base salary in
calendar year 2006 but for the termination to be paid upon the
expiration of the revocation period set forth below, and the
balance to be paid on January 2, 2007; (2) an additional
payment of $20,833.33, paid upon the expiration of the revocation
period set forth below; (3) payment of health benefit premiums
on my behalf until the earlier to occur of my election of health
care coverage through my next employer, or February 28, 2007;
(4) payment of $2,000.00, as compensation for my service on
the Company’s Board of Directors for August 2006 and up to
the date of my resignation during September 2006, and (5) my
retention of the laptop computer which the Company provided to me
(which will be surrendered by me to the Company within three days
and which will be returned to me within a reasonable time after the
Company’s IT department has deleted and imaged all ATC
files). All such Benefits shall be subject to payroll withholding
taxes to the extent required under applicable law.
I understand that I am not entitled
to the Benefits unless I sign this Agreement within twenty one days
after September 22, 2006 (the date this Agreement was first
presented to me) and do not revoke this Agreement within the period
of time described below. I understand and agree that in addition to
the Benefits, the Company has paid me all of my accrued salary and
vacation, to which I am entitled by law. I understand and agree
that in addition to the Benefits, pursuant to the terms of my Stock
Option Agreement dated June 14, 2005, I will have until the
date which is thirty (30) days following the date I execute
this Agreement, to exercise such option to the extent vested on the
date I execute this Agreement. Such option is currently, and on the
last day I am may execute this Agreement will be, vested as to
15,625 shares. The exercise price of such option is $6.05 per
share.
I understand that my option
agreement dated November 1, 2005 will not be vested as to any
shares as of the last date I may execute this Agreement, and
accordingly, will terminate upon my execution of this
Agreement.
By my execution of this Agreement, I
hereby resign from the Company’s Board of Directors effective
immediately. Such resignation is not conditioned upon the other
terms in this Agreement, and will be irrevocable notwithstanding
any revocation of this Agreement.
In exchange for the Benefits
provided to me by this Agreement that I am not otherwise entitled
to receive, I hereby unconditionally and completely release the
Company and its directors, officers, employees, shareholders,
partners, agents, attorneys, predecessors, successors, parent and
subsidiary entities, insurers, affiliates, and assigns from any and
all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts,
conduct, or omissions occurring prior to my signing this
Agreement.
This general release includes, but
is not limited to: (1) all claims arising out of or in any way
related to my employment with the Company or the termination of
that employment including but not limited to that letter agreement
dated October 17, 2005; (2) all claims related to my
compensation or benefits from the Company, including salary,
bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other
ownership interests in the Company; (3) all claims for breach
of contract, wrongful termination, and breach of the implied
covenan
