Negotiating Non-Monetary Terms In Employment Settlement Agreements

ABA WEBINAR: 12/15/14 NEGOTIATING NONMONETARY TERMS IN EMPLOYMENT SETTLEMENT AGREEMENTS Mock Settlement Negotiation Fact Pattern and Proposed Agreement By: Wayne N. Outten and Barbara Jean D’Aquila Angel Bremer, age 54, has worked nine years for HotNew Software, Inc. (“HotNew”), a 250-person subsidiary of GreatTechny Enterprises, Inc. (“GreatTechny”). GreatTechny is a public company whose shares are traded on the Securities and Exchange Commission. At the time of her hire, Angel was employed as a software developer, and she was required to sign a non-disclosure “trade secrets” agreement covering “any proprietary or confidential information acquired or generated by her during her employment.” The agreement regarding intellectual property developed on the job also required her to disclose inventions and assign the rights to the inventions to HotNew. In 2013, Angel was promoted to Vice President of Research and Development (“R&D”) at an annual salary of 300,000. On December 5, 2014, without consulting anyone else in the company, HotNew’s President abruptly fired Angel after he received an anonymous allegation that she was having an affair with Boyd Dogbird, a 39-year-old male subordinate of hers. HotNew conducted no investigation and did not interview Angel or Boyd Dogbird about the allegation. Boyd Dogbird was never disciplined. HotNew hired a 42-year old man to replace Angel. Two years ago, Angel was responsible for firing Joey Fingber, then age 60, who worked for her department. She fired him because he allegedly did not follow policy. She hired a 40-year-old man as his replacement. Joey Fingber has sued HotNew for age discrimination, and Angel is a material witness. Angel kept a personal diary in her office desk, which contains details regarding her relationship with Boyd Dogbird and the problems she was having with Joey Fingber not following policy. On the day Angel was fired, HotNew’s head of security grabbed Angel’s arm and forcibly escorted her from the premises, loudly stating that she was done at the company because she was “untrustworthy.” Angel was and is very distressed about the fact and manner of her termination, the possible disclosure of her diary, and her uncertain job prospects. She hired a lawyer. Angel’s lawyer sent HotNew a demand letter alleging discrimination and defamation and seeking substantial damages for lost compensation and pain and suffering. The Copyright, all rights reserved, Barbara Jean D’Aquila and Wayne Outten, 2014. -1-

Fact Pattern and Draft Agreement for Pedagogical Purposes Only ABA Live CLE – 12/15/14 demand letter was accompanied by a draft EEOC charge alleging age and sex discrimination. The demand letter referenced how public any litigation would be, with widespread media attention because HotNew is the hottest, new software development company servicing the music industry. The demand letter offered to resolve the dispute short of litigation and suggested that HotNew’s legal counsel contact Angel’s lawyer. Legal counsel for Angel and HotNew spoke and quickly agreed, in principle, that in exchange for Angel providing a general release, she would receive one year’s salary plus the opportunity to obtain up to another year’s salary if she did not obtain a job during what would have been the second year after her firing. She was also to receive a pro rata share of her 2014 incentive compensation, plus an extra 50,000 for her “cooperation.” Counsel agreed to meet on December 15, 2014 to discuss other terms. On December 11, 2014, HotNew’s counsel sent a draft agreement to Angel’s counsel for discussion at their anticipated meeting. -2-

Fact Pattern and Draft Agreement for Pedagogical Purposes Only ABA Live CLE – 12/15/14 Settlement Agreement and General Release Important Note: This draft is for pedagogical purposes only and is NOT intended to be a model agreement. Indeed, it contains mistakes and controversial provisions to highlight issues. 1. Parties. The parties to this Agreement and General Release (“Agreement”) are Angel Bremer (“Employee”) and HotNew Software, Inc. (“Employer” or “HotNew”), a subsidiary of GreatTechny Enterprises, Inc. (“GreatTechny”). 2. Dispute and Desired Resolution. Employee worked for HotNew from 2005 to December 5, 2014, when Employer terminated Employee’s employment. Employee has threatened to file an agency charge of discrimination and to sue, and Employee alleges sex and age discrimination and defamation. Employer denies the allegations and has indicated that if filed, it intends to vigorously contest them. Employee and Employer have entered into this Agreement to resolve all disputes that Employee has and/or may have with Employer. 3. Payment. In exchange for Employee’s covenants in this Agreement, including the Release, and provided that Employee has not violated this Agreement, Employer will pay Employee one year of salary of 300,000 less legally-required withholdings and deductions in monthly installments beginning within 60 days after the Agreement’s Effective Date (as defined below). If Employer concludes that Employee has attempted in good faith to obtain employment and has not obtained employment by October 1, 2015, then Employer will pay Employee an additional 25,000 per month less legallyrequired withholdings and deductions for every month Employee is unemployed up to an additional 12 months. Employee agrees that the payments in this paragraph of the Agreement exceed any sums to which the Employee is entitled absent this Agreement. No consideration provided by HotNew in this Agreement, including the payment set forth in this paragraph, shall constitute salary, compensation, and/or benefits for purposes of any benefit plan that HotNew maintains. 4. Attorneys and Attorneys’ Fees and Costs. Employee and Employer were each represented by legal counsel in connection with negotiating this Agreement. Employee and Employer each agree to be responsible for her/its own attorneys’ fees and costs. 5. HotNew’s Management Incentive Plan. Employee will receive a pro-rata share of the sums due to her, if any, for 2014 under Employer’s Management Incentive Plan. The payment will be made in accordance with the plan documents. 6. Continuation of Insurance Benefits. Employee has received separate information regarding Employee’s right to continue coverage after termination, as required by the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Employee -3-

Fact Pattern and Draft Agreement for Pedagogical Purposes Only ABA Live CLE – 12/15/14 understands that Employee must elect to continue COBRA coverage and that Employee is responsible for making timely payments to continue coverage. 7. Pension Benefits. Employee’s right to benefits under the HotNew Pension Plan will be determined by law and in accordance with the terms of the plan. 8. Outplacement Services. Starting on February 1, 2015 and provided Employee has not secured other employment, Employer will provide Employee with professional outplacement services by Fitzgerald & Co. for a period of 3 months up to the cost of 9,000. 9. Release. a. Employer Releasees. As used in this Agreement, the “Employer Releasees” are HotNew, GreatTechny, and any of HotNew’s and/or GreatTechny’s related companies and entities and all of such companies’ past, present, and future parents, divisions, subsidiaries, joint ventures, and affiliates and each and all of those entities’ predecessors, successors, officers, agents, directors, supervisors, employees, servants, representatives, shareholders, owners, attorneys, insurers, and/or other representatives, and their successors and assigns, and all persons and/or entities acting by, through, under, and/or in concert with such any person and/or entity and all of its related or associated companies and entities. b. Released Employee Claims. In exchange for the consideration set forth in this Agreement, Employee, on Employee’s own behalf and on behalf of Employee’s heirs, administrators, successors, assigns, agents, representatives, insurers, and attorneys, agrees to forever and does forever give up, release, and fully discharge any and all known and unknown claims, demands, complaints, actions, liabilities, damages, and/or rights of any kind that Employee has and/or may have, including but not limited to Employee’s Threatened Claims (such claims collectively referred to as “Employee Claims”) against the Employer Releasees that exist and/or may exist from the beginning of time through and including the date that Employee signs this Agreement. Employee understands that Employee is releasing claims Employee may not know exist and that it is Employee’s knowing and voluntary intent to do so. Employee’s release includes without limitation all Employee Claims relating to the terms and conditions of Employee’s employment with the HotNew, the ending of that employment, and all of the claims that Employee made and/or could have made against the Employer Releasees as of the date Employee signs this Agreement. Employee’s release is intended to extend and include, without limitation, any and all Employee Claims based on: i. THE AGE DISCRIMINATION IN EMPLOYMENT ACT, 29 U.S.C. §§621, ET SEQ., INCLUDING THE OLDER WORKERS BENEFIT PROTECTION ACT, 29 U.S.C. §626(f)(1); (collectively, “ADEA”); ii. THE AMERICANS WITH DISABILITIES ACT OF 1990, AS AMENDED BY THE AMERICANS WITH DISABILITIES ACT AMENDMENTS ACT OF 2008, 42 U.S.C. §§12101, ET SEQ.; -4-

Fact Pattern and Draft Agreement for Pedagogical Purposes Only ABA Live CLE – 12/15/14 iii. OTHER EMPLOYEE CLAIMS, WHETHER UNDER UNITED STATES LAW, [insert applicable State] LAW, AND/OR [insert any other applicable] LAW, INCLUDING BUT NOT LIMITED TO CLAIMS INVOLVING: (1) Federal, state or local employment discrimination and/or retaliation laws, regulations or requirements, all as amended, including but not limited to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §§ 2000e, et seq.; the Civil Rights Act of 1991, Pub. L. No. 102-166; the Family and Medical Leave Act, 29 U.S.C. §§ 2601, et seq., the Equal Pay Act of 1963, 29 U.S.C. § 206(d); the Fair Labor Standards Act of 1938, 29 U.S.C. Ch. 8; 42 U.S.C. §§ 1981, 1983 and/or 1985; and any law, statute, ordinance, or regulation enforceable in any State and/or city/municipality relating to employment and/or employment discrimination; (2) Any other statute, ordinance, and/or regulation; (3) Any contract, breach of contract, quasi-contract, promissory estoppel, equitable estoppel, and/or unjust enrichment; (4) Any tort, including wrongful discharge, constructive termination, bad faith discharge, misrepresentation, preengagement representations, fraud of any kind, negligent and/or intentional infliction of emotional distress, defamation, damage to reputation, invasion of privacy of any kind, negligence of any kind, personal injury, tortious interference of any kind, vicarious liability, assault, and/or battery; (5) Any other legal or equitable theory; and/or (6) Any claim for attorneys’ fees, costs, and/or disbursements. c. Not Released by Employee and No Unlawful Restriction. Although by signing this Agreement, Employee is giving up any and all Employee Claims Employee may have as of the date Employee signs this Agreement against the Employer Releasees, there are certain rights that Employee is not giving up. Notwithstanding anything to the contrary in this Agreement, Employee: i) does not release any right that cannot by law be waived or released (e.g., unemployment compensation benefits); and ii) is not waiving any future rights. d. No Suit to the Extent Permitted by Law. To the fullest extent permitted by any law and this Agreement, Employee agrees not to sue on any Employee Claims released in this Agreement. 10. Non-Disparagement. To the fullest extent permitted by law, Employee agrees never to make any disparaging or untrue statements to any person and/or entity about -5-

Fact Pattern and Draft Agreement for Pedagogical Purposes Only ABA Live CLE – 12/15/14 GreatTechny, HotNew, or any of GreatTechny and/or HotNew’s parents, subsidiaries, officers, directors, shareholders, employers, vendors, customers, agents, representatives or other affiliated persons or entities. 11. Positive and Cooperative Attitude. Employer will pay Employee an additional 50,000 if Employee maintains a positive and cooperative attitude in Employee’s dealings with the press, clients, and employees of GreatTechny and HotNew. If HotNew, in its sole discretion, believes that Employee has not engaged in a positive and cooperative attitude and/or has done anything that is detrimental to the interests of adversely to any GreatTechny company (including, but not limited to, HotNew, or any of its parents, subsidiaries, affiliates, divisions, or any of the employees, officers, directors, shareholders, agents, or representatives of any of the foregoing), Employer will not make this payment. 12. Confidentiality. To the fullest extent permitted by law, Employee agrees never to disclose the existence and/or the terms and conditions this Agreement, the circumstances or events underlying the employment termination, and/or the Threatened Claims. Notwithstanding the prior sentence, Employee may make disclosure to Employee’s tax accountant and lawyer, as required by law (e.g., pursuant to a lawful subpoena), and in the event of a claimed breach of this Agreement, provided that Employee takes all requisite steps to maintain confidentiality including filing under seal. 13. Return of Property. Within 3 days of signing this Agreement, Employee agrees to promptly return to HotNew’s Director of Human Resources all tangible and electronic property belonging to HotNew and/or GreatTechny, including the originals and all copies of all records and materials (ID, keys, charge/telephone cards, software equipment, books, paper documents, electronic documents or records, policy and procedure manuals, etc.). Employee agrees that Employer has no property belonging to Employee. 14. No rehire. To the fullest extent permitted by law, Employee agrees never to apply for, accept employment with, and/or be employed by HotNew, GreatTechny, and/or any of those companies’ parents, affiliates, subsidiaries, or successors. 15. Assistance in Litigation. Employee agrees to be fully and completely available to assist HotNew and its representatives with its prosecution and/or defense of any actual or potential legal claims or proceedings involving matters in which Employee may have relevant knowledge. Employer only seeks the truth from Employee when seeking Employee’s assistance. 16. Intellectual Property and Other Confidential Information. Employee acknowledges Employee’s obligations as set forth in the HotNew’s Proprietary Information and Intellectual Property Agreement (“IP Agreement”) Employee signed upon Employee’s hiring with HotNew, covenants that Employee has not violated the IP Agreement, and confirms that Employee will continue to abide by Employee’s obligations in the IP Agreement. In addition, Employee agrees to keep in confidence -6-

Fact Pattern and Draft Agreement for Pedagogical Purposes Only ABA Live CLE – 12/15/14 and will not, except as specifically authorized in writing or as required by law, disclose to or use, for the benefit of Employee and/or any third party, any confidential or proprietary information about any GreatTechny company (including HotNew) and any such company’s business plans or methods of operation, that Employee acquired, learned, developed, and/or created by reason of Employee’s employment unless such information has become public through no fault of Employee. Employee agrees to disclose any inventions that Employee is involved in developing at any time from December 5, 2014 to December 5, 2016. To the fullest extent permitted by law, Employee hereby assigns any and all rights Employee has in any intellectual property that Employee developed in the course of Employee’s employment with HotNew. 17. Non-competition and Non-solicitation. Employee agrees that, for a period of 2 years from the date Employee signs this Agreement, Employee will not, directly or indirectly (including, but not limited to, conduct by any employer, agent, or representative of Employee or of any company in which Employee has a financial interest): (i) compete against GreatTechny, HotNew, or any related company; (ii) solicit or hire any current or future employee of GreatTechny, HotNew, or any related company, away from the employ of such company; or (iii) solicit or encourage any former, present, and/or potential customer, client, or vendor of GreatTechny or HotNew, or any related company, not to do business with such company. Employee acknowledges that the restrictive covenants contained in this Agreement are fair and reasonable. Employee further agrees that, if any restrictive covenant is found to be invalid, in whole or in part, the covenant shall be construed, reformed, and/or bluelined to provide the most restrictive covenants permissible under applicable law. 18. Liquidated Damages. In the event that Employee breaches any covenants in this Agreement, then Employee agrees that Employee is liable to the Employer Releases and that liquidated damages shall apply in the amount of 200,000.00 for any breach proven in a court of law. Further, Employee agrees that the covenants Employee makes in this Agreement, including but not limited to Employee’s confidentiality, noncompetition, and non-solicitation covenants, are material and that HotNew, GreatTechny, the Employer Releasees, and/or any third-party beneficiary of this Agreement, may seek injunctive relief in court for any suspected violation of such obligations. Employee agrees that Employee is liable for the attorneys’ fees and costs incurred by HotNew, GreatTechny, the Employer Releasees, and/or any third-party beneficiary of this Agreement in any breach of contract suit and/or proceeding for injunctive relief in which HotNew, GreatTechny, the Employer Releasees, and/or any third-party beneficiary of this Agreement prevails. 19. Non-admission. HotNew does not admit, and specifically denies, any liability, wrongdoing or violation of any law, statute, regulation, and/or policy. It is expressly understood and agreed that this Agreement is being entered into solely for the purpose of resolving all disputes that Employee has and/or may have through the date Employee signs this Agreement. 20. No Wrongdoing. By signing this Agreement, excluding Employee’s Threatened Claims and to the fullest extent permitted by law, Employee acknowledges that -7-

Fact Pattern and Draft Agreement for Pedagogical Purposes Only ABA Live CLE – 12/15/14 Employee is not aware of any wrongdoing on the part of GreatTechny, HotNew, and/or any other GreatTechny company, or on the part of any employee, agent, representative, or shareholder of GreatTechny, HotNew, and/or any other GreatTechny company. 21. Successors and Assigns. This Agreement shall inure to the benefit of GreatTechny and its affiliates, successors, and assigns, including HotNew, and all of such entities’ employees, agents, representatives, and shareholders. 22. No Assignment by Employee and Writing to Change. This Agreement is not assignable by Employee without the prior written consent of HotNew. Any changes to this Agreement must be made in writing and must be signed by Employee and the Chief Executive Officer of HotNew. 23. Consideration, Attorney Consultation, Revocation, and Effective Date. Employee will have 21 days to consider whether to sign this Agreement. Employer advises Employee to consult with legal counsel before signing this Agreement as it is legally binding upon Employee and resolves all issues Employee has with Employer including Employee’s Threatened Claims. To receive the consideration in this Agreement, Employee must sign this Agreement and return it to HotNew’s legal counsel no later than 21 days after Employee’s receipt of this Agreement. If Employee signs this Agreement, Employee may revoke it within 7 days after signing it. Employee agrees that if Employee signs this Agreement and does not revoke, then within 3 business days after the revocation period has passed, Employee agrees to provide Employer’s legal counse

relating to the Settlement Sum Form (lump sum or over time) and timing of payment (when payments start) Sum exceeds amounts legally due Whether sum includes lawyers' fees and costs Tax issues (withholding v. IRS Form 1099; Section 409A, etc.) Tax ramifications (if no withholding, agreement