SEVERANCEAGREEMENT AND RELEASE RECITALS

 

 

This Severance Agreement and Release (“Agreement”) is made by and between John W. Morgan (“Employee”) and Curon Medical, Inc. (“Company”) (collectively referred to as the “Parties”):

 

WHEREAS, Employee was employed by the Company;

 

WHEREAS, the Company and Employee entered into an Employee Proprietary Information Agreement (the “Confidentiality Agreement”);

 

WHEREAS, the Company and Employee executed an offer letter dated September 28, 1999, in which the Company agreed to loan Employee Eight Thousand Five Hundred Dollars per month for a four-year period (the “Offer Letter”);

 

WHEREAS, the Company and Employee have entered into a Stock Option Agreement, dated October 27, 1999 in which Employee was granted the option to purchase 325,000 shares (post-split, 185,250 shares) of Company stock (the “Option Agreement”), and a Stock Option Agreement dated October 27, 1999 in which Employee was granted the option to purchase 650,000 shares (post-split, 370,500 shares) of Company stock and a related Restricted Stock Purchase Agreement, pursuant to which the Employee purchased 650,000 shares (post-split, 370,500 shares) of the Company’s common stock, subject to the terms and conditions of the Company’s 1997 Stock Option Plan and the Restricted Stock Purchase Agreement (the “Restricted Stock Agreement”), and further subject to the Company’s Repurchase Option, as set forth in the Restricted Stock Purchase Agreement (the “Repurchase Option”) (all stock agreements collectively referred to herein as the “Stock Agreements”);

 

WHEREAS, Employee’s employment with Company was terminated on or about July 17, 2002 (the “Termination Date”);

 

WHEREAS, the Parties, and each of them, wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that the Employee may have against the Company as defined herein, including, but not limited to, any and all claims arising or in any way related to Employee’s employment with, or separation from, the Company;

 

NOW THEREFORE, in consideration of the promises made herein, the Parties hereby agree as follows:

 

 

1.    Consideration.

 

(a) The Company agrees to pay Employee a lump sum of Two Hundred Seventy Five Thousand Dollars ($275,000), less applicable withholding. This payment will be made to Employee

within ten (10) business days after the Effective Date (as defined in Section 27, below) by direct deposit into the Employee account that the Company has on file.

 

(b)    Stock.    The Parties agree that for purposes of determining the number of shares of the Company’s common stock which have been released from the Company’s Repurchase Option under the Restricted Stock Agreement (the “Released Shares”) the Employee shall be considered to have vested in and the Company’s Repurchase Option shall be considered to have been terminated as to 100% of the total shares subject to the Restricted Stock Agreement and purchased by the Employee (post-split, 370,500 shares). Employee agrees that, within 90 days of the Termination Date, he will purchase no more than 69,469 shares (post-split) under the Option Agreement, at a purchase price of 26.3 cents ($0.263) per share. All shares, including those no longer subject to the Repurchase Option, shall continue to be subject to all other terms of the Stock Agreements. Employee shall be entitled to no additional stock; though Employee has been granted additional options, Employee acknowledges that such options will terminate unexercised.

 

(c)    Benefits.    Employee’s health insurance benefits will cease at the end of July, subject to Employee’s right to continue his/her health insurance under COBRA. Employee’s participation in all other benefits and incidents of employment ceased on the Termination Date. Employee ceased accruing employee benefits, including, but not limited to, vacation time and paid time off, as of the Termination Date.

 

(d)    Loan Forgiveness.    The Company agrees that it shall forgive Employee’s obligation to repay any outstanding loan amounts pursuant to the Offer Letter as of the Effective Date.

 

(e)    Computer.    The Company agrees that Employee shall give Employee his Company computer following the Company examination of the computer. Employee agrees that he will turn the computer over to the Company prior to the Effective Date, so that the Company may engage in the examination, and Company agrees to return the computer to Employee as soon as reasonably possible following their performance of the examination. The Company reserves the right to remove all files from the computer that are the property of the Company.

 

2.    Confidential Information.    Employee shall continue to maintain the confidentiality of all confidential and proprietary information of the Company and shall continue to comply with the terms and conditions of the Confidentiality Agreement between Employee and the Company. Employee shall return all of the Company’s property and confidential and proprietary information in his/her possession to the Company on the Effective Date of this Agreement.

 

3.    Payment of Salary.    Employee acknowledges and represents that the Company has paid all salary, wages, bonuses, accrued vacation, commissions and any and all other benefits due to Employee once the above noted payments and benefits are received.

 

4.    Release of Claims.    Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company and its officers, managers, supervisors, agents and employees. Employee, on his/her own behalf, and on behalf of his/her respective heirs, family members, executors, agents, and assigns, hereby fully and forever releases the Company and its officers, directors, employees, agents, investors, shareholders,

2

administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations, and assigns, from, and agree not to sue concerning, any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date of this Agreement including, without limitation:

 

(a)    any and all claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship;

 

(b)    any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

 

(c)    any and all claims under the law of any jurisdiction including, but not limited to, wrongful discharge of employment; constructive discharge from employment; termination in violation of public policy; discrimination; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; and conversion;

 

(d)    any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, The Worker Adjustment and Retraining Notification Act, Older Workers Benefit Protection Act; the California Fair Employment and Housing Act, and the California Labor Code.;

 

(e)    any and all claims for violation of the federal, or any state, constitution;

 

(f)    any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

 

(g)    any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and

 

(h)    any and all claims for attorneys’ fees and costs.

 

The Company and Employee agree that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations incurred under this Agreement.

3

 

Employee acknowledges and agrees that any breach of any provision of this Agreement shall constitute a material breach of this Agreement and shall entitle the Company immediately to recover the severance benefits provided to Employee under this Agreement.

 

5.    Acknowledgement of Waiver of Claims Under ADEA.    Employee acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) and that this waiver and release is knowing and voluntary. Employee and the Company agree that this waiver and release does not apply to any rights or claims that may arise under ADEA after the Effective Date of this Agreement. Employee acknowledges that the consideration given for this waiver and release Agreement is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that he has been advised by this writing that

 

(a)    he should consult with an attorney prior to executing this Agreement;

 

(b)    he has up to twenty-one (21) days within which to consider this Agreement;

 

(c)    he has seven (7) days following his/her execution of this Agreement to revoke this Agreement;

 

(d)    this Agreement shall not be effective until the revocation period has expired; and,

 

(e)    nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs for doing so, unless specifically authorized by federal law.

 

6.    Civil Code Section 1542.    The Parties represent that they are not aware of any claim by either of them other than the claims that are released by this Agreement. Employee acknowledges that he had the opportunity to seek the advice of legal counsel and is familiar with the provisions of California Civil Code Section 1542, which provides as follows:

 

 

Employee, being aware of said code section, agrees to expressly waive any rights he may have thereunder, as well as under any other statute or common law principles of similar effect.

 

7.    No Pending or Future Lawsuits.    Employee represents that he has no lawsuits, claims, or actions pending in his/her name, or on behalf of any other person or entity, against the Company or any other person or entity referred to herein. Employee also represents that he does not intend to bring any claims on his/her own behalf or on behalf of any other person or entity against the Company or any other person or entity referred to herein.

4

 

8.    Application for Employment.    Employee understands and agrees that, as a condition of this Agreement, he shall not be entitled to any employment with the Company, its subsidiaries, or any successor, and he hereby waives any right, or alleged right, of employment or re-employment with the Company, its subsidiaries or related companies, or any successor.

 

9.    Confidentiality.    The Parties acknowledge that Employee’s agreement to keep the terms and conditions of this Agreement confidential was a material factor on which all parties relied in entering into this Agreement. Employee hereto agrees to use his/her best efforts to maintain in confidence: (i) the existence of this Agreement, (ii) the contents and terms of this Agreement, (iii) the consideration for this Agreement, and (iv) any allegations relating to the Company or its officers or employees with respect to Employee’s employment with the Company, except as otherwise provided for in this Agreement (hereinafter collectively referred to as “Settlement Information”). Employee agrees to take every reasonable precaution to prevent disclosure of any Settlement Information to third parties, and agrees that there will be no publicity, directly or indirectly, concerning any Settlement Information. Employee agrees to take every precaution to disclose Settlement Information only to those attorneys, accountants, governmental entities, and family members who have a reasonable need to know of such Settlement Information. The Parties agree that if Company proves that Employee breached this Confidentiality provision, it shall be entitled to an award of its costs spent enforcing this provision, including all reasonable attorneys’ fees associated with the enforcement action, without regard to whether the Company can establish actual damages from the breach by Employee.

 

10.    No Cooperation.    Employee agrees he will not act in any manner that might damage the business of the Company. Employee agrees that he will not counsel or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against the Company and/or any officer, director, employee, agent, representative, shareholder or attorney of the Company, unless under a subpoena or other court order to do so. Employee further agrees both to immediately notify the Company upon receipt of any court order, subpoena, or any legal discovery device that seeks or might require the disclosure or production of the existence or terms of this Agreement, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or legal discovery device to the Company.

 

11.    Non-Disparagement.    The Parties each agree to refrain from any defamation, libel or slander of the other or tortious interference with the contracts and relationships of the other. All inquiries by potential future employers of Employee will be directed to the HR Director of the Company. Upon inquiry, the Company shall only state the following: Employee ‘s last position and dates of employment. Notwithstanding the foregoing, Employee shall be free to use any current or former employee or Board member of the Company as a personal or professional reference.

 

12.    Non-Solicitation.    Employee agrees that for a period of twelve (12) months immediately following the Effective Date of this Agreement, Employee shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees to leave their employment, or take away such employees, or attempt to solicit, induce, recruit, encourage, take away or hire employees of the Company, either for him/herself or any other person or entity.

5

 

13.    No Admission of Liability.  The Parties understand and acknowledge that this Agreement constitutes a compromise and settlement of disputed claims. No action taken by the Parties hereto, or either of them, either previously or in connection with this Agreement shall be deemed or construed to be: (a) an admission of the truth or falsity of any claims heretofore made or (b) an acknowledgment or admission by either party of any fault or liability whatsoever to the other party or to any third party.

 

14.    No Knowledge of Wrongdoing.    Employee represents that he has no knowledge of any wrongdoing involving improper or false claims against a federal or state governmental agency, or any other wrongdoing that involves Employee or other present or former Company employees.

 

15.    Costs.    The Parties shall each bear their own costs, expert fees, attorneys’ fees and other fees incurred in connection with this Agreement.

 

16.    Indemnification.    Employee agreed to indemnify and hold harmless the Company from and against any and all loss, costs, damages or expenses, including, without limitation, attorneys’ fees or expenses incurred by the Company arising out of the breach of this Agreement by Employee, or from any false representation made herein by Employee, or from any action or proceeding which may be commenced, prosecuted or threatened by Employee or for Employee’s benefit, upon Employee’s initiative, or with Employee’s aid or approval, contrary to the provisions of this Agreement. Employee further agrees that in any such action or proceeding, this Agreement may be pled by the Company as a complete defense, or may be asserted by way of counterclaim or cross-claim.

 

17.    Tax Consequences.    The Company makes no representations or warranties with respect to the tax consequences of the payment of any sums to Employee under the terms of this Agreement. Employee agrees and understands that he/she is responsible for payment, if any, of local, state and/or federal taxes on the sums paid hereunder by the Company and any penalties or assessments thereon. Employee further agrees to indemnify and hold the Company harmless from any claims, demands, deficiencies, penalties, assessments, executions, judgments, or recoveries by any government agency against the Company for any amounts claimed due on account of Employee’s failure to pay federal or state taxes or damages sustained by the Company by reason of any such claims, including reasonable attorneys’ fees.

 

18.    Arbitration.    The Parties agree that any and all disputes arising out of, or relating to, the terms of this Agreement, their interpretation, and any of the matters herein released, shall be subject to binding arbitration in Santa Clara County before the American Arbitration Association under its National Rules for the Resolution of Employment Disputes. The Parties agree that the prevailing party in any arbitration shall be entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration award. The Parties agree that the prevailing party in any arbitration shall be awarded its reasonable attorneys’ fees and costs. The Parties hereby agree to waive their right to have any dispute between them resolved in a court of law by a judge or jury. This section will not prevent either party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of their dispute relating to Employee’s obligations under this Agreement and the agreements incorporated herein by reference.

6

19.    Authority.    The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement. Employee represents and warrants that he has the capacity to act on his/her own behalf and on behalf of all who might claim through him/her to bind them to the terms and conditions of this Agreement. Each party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.

 

20.    No Representations.    Each party represents that it has had the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither party has relied upon any representations or statements made by the other party hereto which are not specifically set forth in this Agreement.

 

21.    Severability.    In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision so long as the remaining provisions remain intelligible and continue to reflect the original intent of the Parties.

 

22.    Entire Agreement.    This Agreement represents the entire agreement and understanding between the Company and Employee concerning the subject matter of this Agreement and Employee’s relationship with the Company, and supersedes and replaces any and all prior agreements and understandings between the Parties concerning the subject matter of this Agreement and Employee’s relationship with the Company, with the exception of the Confidentiality Agreement and the Stock Agreements.

 

23.    No Waiver.    The failure of any party to insist upon the performance of any of the terms and conditions in this Agreement, or the failure to prosecute any breach of any of the terms and conditions of this Agreement, shall not be construed thereafter as a waiver of any such terms or conditions. This entire Agreement shall remain in full force and effect as if no such forbearance or failure of performance had occurred.

 

24.    No Oral Modification.    Any modification or amendment of this Agreement, or additional obligation assumed by either party in connection with this Agreement, shall be effective only if placed in writing and signed by both Parties or by authorized representatives of each party.

 

25.    Governing Law.    This Agreement shall be deemed to have been executed and delivered within the State of California, and it shall be construed, interpreted, governed, and enforced in accordance with the laws of the State of California, without regard to conflict of law principles. To the extent that either party seeks injunctive relief in any court having jurisdiction for any claim relating to the alleged misuse or misappropriation of trade secrets or confidential or proprietary information, each party hereby consents to personal and exclusive jurisdiction and venue in the state and federal courts of the State of California.

 

26.    Attorneys’ Fees.    In the event that either Party brings an action to enforce or effect its rights under this Agreement, the prevailing party shall be entitled to recover its costs and expenses, including the costs of mediation, arbitration, litigation, court fees, plus reasonable attorneys’ fees, incurred in connection with such an action.

7

27.    Effective Date.    This Agreement is effective after it has been signed by both parties and after eight (8) days have passed since Employee has signed the Agreement (the “Effective Date”), unless revoked by Employee within seven (7) days after the date the Agreement was signed by Employee.

 

28.    Counterparts.    This Agreement may be executed in counterparts, and each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

 

29.    Voluntary Execution of Agreement.    This Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims. The Parties acknowledge that:

 

(a) They have read this Agreement;

 

(b) They have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel;

 

(c) They understand the terms and consequences of this Agreement and of the releases it contains; and

 

(d) They are fully aware of the legal and binding effect of this Agreement.

 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

 

						CURON MEDICAL, INC.
Dated: July 18, 2002						By:		/s/    MICHAEL BERMAN
								Michael Berman, Chairman
						JOHN W. MORGAN, an individual
Dated: July 19, 2002						By:		/s/    JOHN W. MORGAN
								John W. Morgan

8