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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
covenant of good faith and fair dealing; (4) all tort claims,
including claims for fraud, defamation, emotional distress, and
discharge in violation of public policy; and (5)
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