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Mark Thimmig Separation Agreement

This is an actual contract by Varsity Group.

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Sectors: Specialty Retail, Internet
Effective Date: November 21, 2006
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Exhibit 10.1


This Separation Agreement (the " Agreement" ) is made effective as of November 21, 2006 (the " Effective Date" ), by and between Mark Thimmig (" Employee" ) and Varsity Group Inc., a Delaware corporation (the " Company" ), with reference to the following facts:

A. Employee and the Company are parties to that certain letter agreement, dated as of February 13, 2006 (the " Employment Agreement" ).

B. Employee' s status as an employee of the Company ended due to a voluntary resignation from such office effective on November 16, 2006.

C. Employee and the Company desire to assure a smooth and effective transition of Employee' s duties to his successor and to wind-up their employment relationship amicably.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:

1. Resignation from Board . Employee acknowledges and agrees that he shall and hereby does resign as a member of the board of directors of the Company and any of its subsidiaries, including any committees of which Employee is a member, effective as of the Effective Date. 2. Termination Date . Employee acknowledges that his status as an employee and/or officer of the Company and any subsidiary or other affiliate of the Company ended due to his voluntary resignation from such office on November 16, 2006 (the " Termination Date" ).

3. Separation Payments and Benefits . Without admission of any liability, fact or claim, the Company hereby agrees, subject to the execution hereof by both parties and Employee' s continuing performance of his continuing obligations pursuant to this Agreement, to provide Employee the severance benefits as follows:

(a) Base Salary and Severance Benefit. The Company shall continue to pay to Employee his base salary at the rate of $260,000 per annum (" Base Salary" ) through the Termination Date in accordance with the Company' s normal payroll practices. The Company shall also pay to Employee his accrued and unpaid vacation time as of the Termination Date. In addition, the Company shall pay to Employee, as a severance benefit, (i) the balance of the Base Salary otherwise payable for the payroll period during which the Termination Date occurred, payable consistent with the Company' s standard payroll practices, plus (ii) a cash lump sum in the amount of $50,000 on, or as soon as administratively practicable following, October 1, 2007.

(b) Business Expenses . The Company shall reimburse Employee for all outstanding expenses incurred prior to the Termination Date and in the course of performing Employee' s duties as an employee of the Company which are appropriate and consistent with the Company' s policies in effect from time to time with respect to travel, entertainment and other proper business expenses, subject to the Company' s requirements with respect to reporting and documenting such expenses. Employee submitted all such business expenses to the Company for reimbursement on or prior to the Effective Date.


(c) Stock Options . The Company and Employee acknowledge that they are parties to that certain Incentive Stock Option Agreement dated February 17, 2006 pursuant to which Employee was granted the right to purchase an aggregate of 100,000 shares of the Company' s common stock as summarized on Exhibit A to this Agreement (the " Stock Option Agreement" ). The Company and Employee acknowledge that the Stock Option Agreement remains in full force and effect in accordance with its terms and the related plan documents and agree that (i) any such options which were granted under the Stock Option Agreement and were not vested on or before the Termination Date shall terminate on the Termination Date and (ii) the vested options to acquire 11,666 shares of the Company' s common stock shall expire on February 16, 2007 and Employee agrees to exercise such options, if at all, on or before February 16, 2007, whereupon any unexercised options shall immediately terminate and be of no further force and effect.

(d) Restricted Stock . The Company and Employee acknowledge that they are parties to that certain Restricted Stock Agreement dated February 17, 2006 (the " Restricted Stock Agreement" ) pursuant to which the Company granted Employee 300,000 shares of the Company' s common stock subject to certain restrictions and a right of repurchase in favor of the Company (the " Restricted Stock" ). The Company and Employee acknowledge that as of the Termination Date 56,250 shares of Restricted Stock have vested and are no longer subject to restrictions or a right of repurchase in favor of the Company (including the 6,250 shares otherwise scheduled to vest on November 17, 2006). The Company agrees that on the eighth (8 th ) day following the date Employee signs this Agreement (the " Eighth Day" ), the number of shares of Restricted Stock calculated by dividing $150,000 by the average closing price of the Company' s common stock for the three (3) trading days prior to the Eighth Day shall vest and any restriction or right of repurchase with respect to such shares shall immediately lapse, thereby resulting in Employee having unrestricted ownership of such shares, subject to Employee paying to the Company any federal, state and local withholding and other employment taxes applicable to Employee upon such event. Such payment shall be in cash or through the delivery of a notice to the Company that Employee has placed a market sell order with a broker with respect to shares of the Company' s common stock, including shares that vest pursuant to the preceding sentence, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of such withholding and employment taxes with the Company as an intended third party beneficiary of such direction. Employee agrees that the Company shall be entitled to deduct such withholding and employment taxes from any other amounts payable under this Agreement if the broker fails to pay such proceeds in such an amount to the Company prior to the market close of the trading day immediately following the Eighth Day. After giving effect to the foregoing, the Company' s repurchase right with respect to any Restricted Stock which remains subject to right of repurchase in favor of the Company shall be deemed exercised immediately following the Eighth Day and the repurchase price therefor shall be deemed paid through the consideration provided by the Company in this Agreement, the sufficiency of which is hereby acknowledged by Employee and the Company. Shares deemed repurchased shall thereupon be cancelled and shall be considered redeemed, retired and returned to the status of unissued shares reserved under the applicable Company equity incentive plan. (e) SEC Reporting. Employee further acknowledges that to the extent required by the Securities Exchange Act of 1934, as amended, he will have continuing obligations under Section 16(a) and 16(b) of such act to report his transactions in Company common stock for six months subject to the termination of his status as an officer of the Company (it being agreed Employee shall be solely responsible for such forms). Employee


shall be released from the Company' s insider trading policy effective on the Termination Date in reliance on the representation by Employee that he does not presently possess material non-public information regarding the Company, it being acknowledged by the parties that the federal securities laws prohibit the purchase or sale of securities while in the possession of material non-public information.

(f) Bonus and Other Compensation Arrangements . For the avoidance of doubt, the Company and Employee acknowledge and agree that Employee will not be eligible to receive any bonus compensation or any other award under Company bonus, stock or other compensation plan except as set forth herein.

(g) Taxes . Employee understands and agrees that all payments under this Agreement will be subject to appropriate tax withholding and other deductions, as and to the extent required by law. To the extent any taxes may be payable by the Employee for the benefits provided to him by this Agreement beyond those withheld by the Company, the Employee agrees to pay them himself and to indemnify and hold the Company and the other entities released herein harmless for any tax claims or penalties, and associated attorneys' fees and costs, resulting from any failure by him to make required payments (h) Sole Separation Benefit . Employee agrees that the payments provided by this Agreement are not required under the Company' s normal policies and procedures and are provided as a severance solely in connection with this Agreement and the Employment Agreement. Employee further acknowledges and agrees that the payments referenced in this Agreement constitute adequate and valuable consideration, in and of themselves, for the promises contained in this Agreement.

4. Full Pa
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