SEPARATION AGREEMENT
THIS AGREEMENT is made as of the 29th day of October, 2007
(the “Agreement Date”), between Winland Electronics,
Inc., a Minnesota corporation (the “Company”), and
Lorin Krueger (the “Employee”).
BACKGROUND:
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A.
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The
Employee and the Company are parties to an Employment Agreement
dated January 23, 2007 (the “Employment Agreement”)
under which the Employee is employed by the
Company. Under the terms of the Employment Agreement,
Employee is entitled to severance pay and benefits under certain
circumstances including the condition that he release the Company
from legal claims in exchange for such severance pay.
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B.
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The
Company believes that a leadership change is in the best interests
of the Company.
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C.
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The
Company wishes Employee to remain as CEO and Employee has agreed to
remain as CEO until January 2, 2008, at which time his resignation
will be effective. The Company wishes Employee to remain
as a director of the Company and Employee desires to remain as a
director until the expiration of his current term on the day of the
Company’s Annual Meeting of Shareholders in May 2008, subject
to the relevant provisions of this Agreement.
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D.
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Employee
and the Company have reached an agreement regarding the
Employee’s separation from the Company and desire to
memorialize that agreement.
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THE COMPANY AND THE EMPLOYEE AGREE AS
FOLLOWS:
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1.
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TERMINATION OF EMPLOYMENT .
Employee's employment with the Company is terminated effective as
of the close of the Company’s business day on January 2, 2008
(the “Termination Date”).
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a.
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Between
the Agreement Date and the Termination Date (the
“Transition”), Employee will report to the Board of
Directors of the Company or its designee (the
“Board”). Employee agrees to perform agreed
upon duties as assigned by the Board, and assist and cooperate with
the Board during the Transition, as requested by the
Board. Such duties may include but are not limited to
assisting in (1) the search for a replacement CEO; (2) the
transition of responsibilities to the next CEO and/or an interim
individual performing the CEO function, to the extent one is chosen
and begins employment prior to the Termination Date; (3) continued
development of strategy, budgets and planning for 2008 operations;
and (4) customer, investor and public relations.
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b.
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During
the Transition, Employee shall serve the Company faithfully and to
the best of his ability. Except as approved in writing
by the Board, which approval shall not be unreasonably withheld,
Employee shall devote his full business and professional time,
energy and diligence to the performance of his duties.
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c.
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During
the Transition, Employee shall receive the same compensation and
benefits to which he is entitled under the Employment
Agreement.
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d.
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It
is understood and agreed that, subsequent to December 31, 2007,
Employee shall not be required to sign as an officer of the Company
any documents or representations for which he may be held
personally liable, including but not limited to any 10k, quarterly
or 204 filings, Company checks or insurance
certificates,
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3.
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PAYMENTS . In exchange for the promises,
releases and agreements made by the Employee in this Agreement and
in full satisfaction of its obligations under the Employment
Agreement, absent rescission by Employee of this Agreement, the
Company will:
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a.
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Pay
Employee, on or before the close of business on January 3, 2008, a
lump sum of $196,625.00, equal to thirteen (13) months of
Employee’s current base salary, subject to required and
authorized deductions and withholdings;
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b.
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Continue
to pay the Company’s ordinary share of premiums for six (6)
calendar months for Employee’s COBRA continuation coverage in
the Company’s group medical, dental and life insurance plans
(as applicable), provided Employee elects such continuation
coverage and timely pays Employee’s share of such premiums,
if any;
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c.
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Pay
into Employee’s Health Savings Account (“HSA”)
with the Company the Company’s entire $2,500 contribution for
2008. Said payment shall be made on January 2, 2008,
while Employee is still employed by Company, so that the
contribution may be used by Employee, in accordance with the
applicable plan documents, during 2008.
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d.
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Pay
to Employee the cash equivalent of all accrued, unused paid time
off (“PTO”) as of January 2, 2008 in the following
manner: (1) prior to close of business on January 2, 2008, while
Employee is still employed by Company, Company shall pay the first
$3000 of this PTO (or, if that amount is not permitted by the HSA
plan documents, the maximum amount permitted thereby) into
Employee’s HSA with the Company; (2) prior to close of
business on January 2, 2008, while Employee is still employed by
Company, Company shall pay as much of the PTO into Employee’s
flex spending account as is necessary to cover Employee’s
share of his COBRA contributions for the first six months of 2008
(or, if that amount is not permitted by the plan documents, the
maximum amount permitted thereby); (3) prior to close of business
on January 2, 2008, while Employee is still employed by Company,
Company shall pay as much of the remainder of this PTO as is
permitted by Company’s 401k plan documents into
Employee’s 401k account with the Company; and (4) any
remainder of this PTO, after payments have been made in accordance
with the preceding subparts of this paragraph, shall be paid to
Employee on or before the close of business on January 3,
2008;
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e.
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Pay
into Employee’s 401k account with the Company, prior to the
close of business on January 2, 2008, while Employee is still
employed by Company, the full amount of the Company’s 401k
matching contribution permitted by the 401k plan
documents;
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f.
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Pay
reasonable sums for and/or provide legal counsel and support as
needed by Employee in order to sell Company stock following the
Termination Date, up to $1000. Prior to retaining and
seeking reimbursement for independent counsel in accordance with
this provision, Employee will first contact the Company and offer
it the opportunity to provide the requested counsel and
support. If the Company fails to provide or commit to
said support within 48 business hours of Employee’s request,
Employee shall be free to retain independent counsel, and Employee
shall be reimbursed for related opinions and support provided by
said counsel. While Employee is serving as a Director of
the Company, he shall receive from the Company, in this regard, the
same legal counsel and support as all other Directors, as well as
the payment/assistance contemplated by this subparagraph, to the
extent necessary;
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g.
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Reimburse
Employee up to $1000 for professional fees (accounting, tax
preparer and/or legal) incurred by Employee in the preparation of
his 2007 tax return. Said reimbursement shall be made by
Company to Employee within thirty (30) days of delivery of related
receipts to Company; and
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h.
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Reimburse
Employee up to $5000 collectively for the following expenses: (1)
2008 Mankato Golf Club Social membership; (2) 2008 CEO Round Table
membership; (3) four Mankato State University hockey and
basketball tickets for the 2007-08 seasons; and (4) career
transition and/or personal coaching services. Said
reimbursement shall be made by Company to Employee within thirty
(30) days of delivery of related receipts to Company.
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4.
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OTHER CONSIDERATIONS .
Also in exchange for the promises, releases and agreements made by
the Employee in this Agreement and in full satisfaction of its
obligations under the Employment Agreement, absent rescission by
Employee of this Agreement, the Company agrees:
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a.
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Employee
shall remain a Director of the Company until the expiration of his
current term on the day of the Company’s Annual Meeting of
Shareholders in May 2008, subject to removal under the same
circumstances as all other Directors of the
Company. Following the Termination Date, Employee shall
be compensated for his services in that role, including but not
limited to the payment of fees, expenses and memberships,
consistent with payment made to all other non-employee Directors of
the Company.
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b.
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Subject
to applicable laws, articles and bylaws, including but not limited
to any independece requirements, Employee shall become a
non-voting, non-independent member of the Company’s Audit and
Governance Committees.
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c.
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To
the extent Company shall seek or require Employee’s services
following the Termination Date, other than in his capacity as a
Director, the Company shall compensate Employee at a rate of $100
per hour, plus necessary expenses, for said
services. Payment for these services shall be made by
Company to Employee within thirty (30) days of delivery an invoice
to Company.
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d.
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Upon
request by Employee, the Company agrees to sign and provide to
Employee a reference letter mutually agreeable to Employee and the
Company.
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e.
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Employee
shall be permitted to retain following the Termination Date his
desktop PC, his notebook PC, and his Palm Treo 700 cell phone
(including its number). It is understood that Employee
shall purge from each of these items, in the presence of a Company
representative, all of the Company’s confidential
information.
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f.
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It
is understood and agreed that, notwithstanding any other provision
of this Agreement, the Company shall indemnify, defend and hold
harmless Employee (to the fullest extent permitted by law) from and
against any and all claims made against him as a result of and/or
arising out of his service and/or tenure as an officer and/or
director of the Company, and/or as a trustee of the Company’s
401k plans, including but not limited to any and all SEC claims
and/or investigations.
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a.
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Specifically
in consideration of the Company’s agreements described in
Paragraphs 3 and 4 of this Agreement, Employee, for himself and
anyone who has or obtains legal rights or claims through him,
releases, agrees not to sue, and forever discharges the Company (as
defined below) from any and all manner of claims, demands, actions,
causes of action, administrative claims, liability, damages, claims
for punitive or liquidated damages, claims for attorney’s
fees, costs and disbursements, individual or class action claims,
or demands of any kind whatsoever, Employee has or might have
against them or any of them, whether known or unknown, in law or
equity, contract or tort, arising out of or in connection with
Employee’s employment with the Company, or the termination of
that employment, or otherwise, and however originating or existing,
from the beginning of time through the date of Employee’s
signing this Agreement. As a condition to receiving the
consideration described in Paragraphs 3 and 4, on the Termination
Date, Employee shall reaffirm this release and the remaining
covenants under this Paragraph 5 effective as of the completion of
the term of his employment on that date by signing the Release
attached hereto as Exhibit A.
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b.
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This
release includes, without limiting the generality of the foregoing,
any claims Employee may have for wages, bonuses, commissions,
penalties, deferred compensation, vacation pay, separation
benefits, defamation, invasion of privacy, negligence, emotional
distress, breach of contract, estoppel, improper discharge (based
on contract, common law, or statute, including any federal, state
or local statute or ordinance prohibiting discrimination or
retaliation in employment), violation of the United States
Constitution, the Minnesota Constitution, the Age Discrimination in
Employment Act, 29 U.S.C. § 621 et seq., the Minnesota Human
Rights Act, Minn. Stat. § 363.01 et seq., Title VII of the
Civil Rights Act, 42 U.S.C. § 2000e et seq., the Americans
with Disabilities Act, 42 U.S.C. § 12101 et seq., the Employee
Retirement Income Security Act of 1976, 29 U.S.C. §
1001
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