Exhibit 10.15
SEPARATION AGREEMENT
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THIS SEPARATION AGREEMENT (the "Agreement") dated as of November 15, 2000,
is entered into by and between DANIEL A. GERRITY (hereinafter referred to as
"Executive") and COINSTAR, INC., a Delaware corporation (hereinafter referred to
as "Coinstar").
RECITALS
Executive and Coinstar wish to enter into an agreement to resolve any and
all issues that may exist between them in connection with the employment
relationship and its planned termination.
AGREEMENTS
1. EMPLOYMENT: ENDING DATE AND RESPONSIBILITIES
Executive's employment as President and Chief Executive Officer with
Coinstar will terminate effective November 15, 2000 (the "Effective Date").
Contemporaneous with the execution of this Agreement, Executive will submit in
writing his resignation from Coinstar in a form substantially similar to the
letter attached hereto as Exhibit A.
2. SEVERANCE PAY AND BENEFITS
Coinstar agrees to provide Executive twelve (12) months' severance pay
(aggregate $300,000) following the Effective Date. Such payment shall be
provided in equal monthly installments, less applicable deductions and tax
withholding, at regular payroll intervals. Coinstar agrees to continue
Executive's health insurance benefits, including current dependent coverage, for
twelve (12) months following the Effective Date. Thereafter Executive may self-
pay health insurance under COBRA if he elects to do so. Executive shall be
eligible for and receive his annual cash bonus for the year 2000, provided
Coinstar meets performance targets applicable to such bonuses. All other
Coinstar benefits cease on the Effective Date except that the company will make
a good faith effort to preserve Executive's participation in the Flexible
Spending Account program through it's plan year end of July 31, 2001.
3. STOCK OPTIONS
One hundred percent (100%) of Executive's unvested Coinstar options will
immediately vest, with the measurement for such vesting to be October 31, 2000.
Once vesting has occurred, all Coinstar options held by Executive can be
exercised at any time for up to a four-year period from the Effective Date.
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4. OUTPLACEMENT AND OTHER SERVICES
Coinstar will provide Executive with outplacement services provided by the
Lee Hecht Harrison firm in an amount not to exceed Five Thousand Dollars
($5,000). Such services will be evidenced by appropriate invoices and billed
directly to Coinstar. In addition, for a period of ninety (90) days following
the Effective Date, Executive shall have continued use of Coinstar voice mail
and email as well as secretarial support, provided such support does not
unreasonably interfere with the other assigned duties of the secretarial
resource. Executive shall receive reimbursement for professional tax planning
services in an amount not to exceed the cost of four (4) hours of such services
in addition to the fifteen (15) hours already authorized by the compensation
committee of the board for option exercise tax planning strategy services for
members of the senior management team. Coinstar shall also reimburse Executive
the cost of registration for the Four Roles of Leadership (November 28, 2000).
5. NON-DISPARAGEMENT OBLIGATION
Executive and Coinstar shall refrain from making any derogatory comment in
the future to the press or any individual or entity regarding the other that
relates to their activities or relationship prior to the date of this Agreement,
which comment would likely cause material damage or harm to the business
interests or reputation of Executive or Coinstar. Executive and Coinstar
further agree to characterize the separation as a resignation. The announcement
of Executive's departure shall be in a form substantially similar to the
statement attached hereto as Exhibit B.
Executive and Coinstar acknowledge that the non-disparagement provisions of
this Section 5 are essential to Executive and Coinstar, that Executive and
Coinstar would not enter into this Agreement if it did not include this Section
5, and that damages sustained by Executive or Coinstar as a result of a breach
of this Section 5 cannot be adequately quantified or remedied by damages alone.
Accordingly, each of Executive and Coinstar shall be entitled to injunctive and
other equitable relief to prevent or curtail any material breach of this Section
5.
6. VALID CONSIDERATION
Executive recognizes and agrees that Coinstar's commitments and
undertakings herein are not required by Coinstar's policies or procedures or by
any contractual obligation of Coinstar and are solely as consideration for
resolution of the severance arrangements between Executive and Coinstar arising
out of his employment.
7. CONFIDENTIALITY OF SEPARATION AGREEMENT
Executive and Coinstar shall keep the fact and terms of this Agreement
confidential, except with respect to a public announcement approved by both
parties. Executive may disclose this Agreement to 1) his immediate family,
legal counsel and/or financial advisors (if any), with the understanding that
each of those individuals or entities shall also be bound by this
confidentiality obligation, or 2) if disclosure is required by law. If
Executive and/or those
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individuals or entities believe that disclosure is required by law, they agree
to give reasonable notice to Coinstar so that Coinstar may, in its discretion,
take action to prevent disclosure.
Except as allowed herein, Executive shall not initiate communications
regarding this Agreement. If asked, Executive shall state only that he plans to
leave Coinstar to pursue other career opportunities.
Executive and Coinstar acknowledges that the confidentiality provisions of
this Section 7 are essential to Executive and Coinstar, that Executive and
Coinstar would not enter into this Agreement if each party did not include this
Section 7, and that damages sustained by either Executive or Coinstar as a
result of a breach of this Section 7 cannot be adequately quantified or remedied
by damages alone. Accordingly, Executive and Coinstar shall be entitled to
injunctive and other equitable relief to prevent or curtail any material breach
of this Section 7.
8. MUTUAL GENERAL RELEASE OF CLAIMS
Executive expressly waives any claims against Coinstar and releases
Coinstar (including its officers, directors, stockholders, managers, agents and
representatives) from any claims he may have in any way connected with his
employment with Coinstar and the scheduled termination of his employment. It is
understood that this release includes, but is not limited to, any claims for
wages, bonuses, employment benefits, or damages of any kind whatsoever, arising
out of any contracts, expressed or implied, any theory of wrongful discharge,
any legal restriction on Coinstar's right to terminate employees, or any federal
state, or other governmental statute or ordinance, including, without
limitation, Title VII of the Civil Rights Act of 1964, the federal Age
Discrimination in Employment Act, the Washington Law Against Discrimination, or
any other legal limitation on the employment relationship. Executive represents
that he has not filed any complaints, charges or lawsuits against Coinstar with
any governmental agency or any court, and agrees that he will not initiate,
assist or encourage any such actions. This waiver and release shall not waive
or release any claims under this Agreement or predicated on acts that occur
after the date of execution of this Agreement.
Coinstar expressly waives any claims against Executive and releases Executive
from any claims it may have in any way connected with his employment with
Coinstar and the scheduled termination of his employment. Coinstar represents
that it has not filed any complaints, charges or lawsuits against Executive with
any governmental agency or any court, and agrees that it will not initiate,
assist or encourage any such actions. This waiver and release shall not waive
or release any claims under this Agreement or predicated on acts that occur
after the date of execution of this Agreement.
9. INDEMNIFICATION
Nothing in this Agreement, including the Executive's release of claims, shall
affect the indemnification rights and obligations to which he may be subject
under the Indemnity Agreement entered into in July 1997 between Executive and
Coinstar. Coinstar represents that throughout the term of Executive's
employment as an officer or director of Coinstar he was
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covered by Coinstar's primary directors' and officers' liability insurance and
excess directors' and officers' liability insurance, as well as the Indemnity
Agreement.
10. NONCOMPETITION AND NONDISCLOSURE
The nature of Executive's employment with Coinstar has given Executive
access to trade secrets and confidential information, including information
about its technology and customers. Therefore, during the one (1) year
following the Effective Date, Executive agrees that he will not work directly or
indirectly (as an employee, consultant, advisor or owner) for any of the
following businesses or companies and their affiliates: Catalina Marketing
Corporation, News America Marketing, ScanCoin Corporation, Brinks, Inc., planet
U and Valassis Corporation; provided however, this provision does not preclude
Executive from owning up to a 5% interest in such company, as long as such
company's securities are publicly traded.
11. NON-INTERFERENCE WITH COMPANY'S EMPLOYMENT RELATIONSHIP
Executive agrees that he will not directly or indirectly seek to induce the
departure of or hire away any current employees of Coinstar for a period of one
(1) year from the Effective Date. In addition, he agrees not to interfere in
any manner with the employment relations between Coinstar and its other
employees.
12. REVIEW AND REVOCATION PERIOD; EFFECTIVE DATE
Executive and Coinstar agree that he shall have twenty-one (21) days to
review this Agreement (although he may choose to execute it sooner) and consult
an attorney if he so chooses, during which time the proposed terms of this
Agreement shall not be amended, modified or revoked by Coinstar. Executive may
revoke this Agreement if he so chooses by providing written notice of his
decision to revoke this Agreement to Coinstar within seven (7) days following
the date he signs this Agreement. This Agreement shall become effective and
enforceable upon expiration of this seven (7) day revocation period.
13. SEVERABILITY
The provisions of this Agreement are severable, and if any part of it is
found to be unlawful or unenforceable, the other provisions of this Agreement
shall remain fully valid and enforceable to the maximum extent consistent with
applicable law.
14. AVAILABILITY AND CONSULTATION
Executive agrees to make himself reasonably available to Coinstar and
counsel for Coinstar for the purpose of enabling Coinstar to defend against any
legal claims in which Coinstar determines he may have knowledge or information.
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15. REIMBURSEMENT OF CERTAIN EXPENSES
Coinstar shall reimburse Executive for attorney's fees and expenses, to a
maximum of $1,500, incurred in the preparation and review of this Agreement.
Coinstar further agrees to reimburse Executive for reasonable out-of-pocket
expenses incurred in connection with any consultations under Section 14, to the
extent they are not already covered by the Indemnity Agreement
16. SUCCESSORS AND ASSIGNS
This Agreement will bind and inure to the benefit of the parties and their
respective legal representatives, successors and assigns.
17. NON-ADMISSION
This Agreement shall not be construed as an admission by Coinstar of any
wrongful act, and Coinstar specifically denies any liability to Executive. This
Agreement is entered into by Coinstar solely for the purpose of resolving all
disputes between Coinstar and Executive for all events occurring on or before
the date of execution of this Agreement.
18. KNOWING AND VOLUNTARY AGREEMENT
Executive represents and agrees that he has read this Agreement,
understands its terms and the fact that it releases any claim he might have
against Coinstar and its agents, understands that he has the right to consult an
attorney of his choice, acknowledges that he has in fact consulted an attorney,
and enters into this Agreement without duress or coercion from any source.
19. ENTIRE AGREEMENT
This Agreement sets forth the entire understanding between Executive and
Coinstar, superseding any prior agreements or understandings, express or
implied, pertaining to the terms of Executive`s employment with Coinstar.
Executive acknowledges that in executing this Agreement, he does not rely upon
any representation or statement by any representative or agent of Coinstar
concerning the subject matter of this Agreement.
20. APPLICABLE LAW
This Agreement and all obligations and duties under this Agreement shall be
governed by and interpreted according to the laws of the State of Washington,
without regard to its choice of law principles.
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21. REPRESENTATIONS AND WARRANTIES OF COINSTAR
The execution, delivery and performance of this Agreement have been duly
authorized and approved by Coinstar's compensation committee of the board of
directors and this Agreement constitutes a valid and binding agreement of
Coinstar, enforceable in accordance with its terms.
Dated: November 15, 2000 /s/ Daniel A. Gerrity
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Daniel A. Gerrity
COINSTAR, INC.
Dated: November 15, 2000 By /s/ M. Carol Lewis
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Its Corporate Secretary
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EXHIBIT A
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MEMORANDUM
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TO: MEMBERS OF THE BOARD OF DIRECTORS OF COINSTAR INC
FROM: DAN GERRITY
SUBJECT: RESIGNATION
DATE: 11/1/00
CC:
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I hereby resign my positions on the Board of Directors of Coinstar, Inc.,
Meals.com and Coinstar International, Inc.
I also hereby resign as President and Chief Executive Officer of Coinstar
effective November 15, 2000, to pursue other business opportunities.
I have enjoyed participating in Coinstar's growth from 0 to $100 million in
revenues and from a handful of people to 450 employees today, and I have learned
a great deal from the experience.
I am also grateful for the opportunity to have worked with each of you. I have
learned a great deal and enjoyed knowing you each on a personal level.
I wish you and the Company continued success in the future.
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EXHIBIT B
FOR IMMEDIATE RELEASE
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COINSTAR POSTS RECORD RESULTS IN THE THIRD QUARTER OF 2000;
CEO TO DEPART ON HIGH NOTE
BELLEVUE, Wash.-Nov. 2, 2000-Coinstar Inc. (Nasdaq: CSTR) today announced record
revenues, direct contribution, and EBITDA in its core business for the
three-month period ended September 30, 2000. The company also announced the
departure of its president and CEO, Dan Gerrity.
UNITED STATES CORE BUSINESS
Revenues for the United States core business were $28.5 million in the third
quarter of 2000. Compared with the third quarter of 1999, revenues increased
31.5 percent on a 24.5 percent increase in the number of units. Comparable
revenues (for machines installed in the same location for more than one year)
increased 13.6 percent.
Direct contribution increased 42.4 percent to $15.6 million, as the direct
contribution margin expanded to a record 54.7 percent in the third quarter of
2000, from 50.5 percent in the third quarter of 1999.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 14.1 percent, from $4.9 million in the third quarter of 1999 to $5.6
million in the third quarter of 2000, despite a significant increase in
marketing expenditures, from $1.3 million to $4.9 million for the same
year-over-year period.
The net loss from the United States core business in the third quarter of 2000
was $1.8 million, or $0.09 per share, compared to a loss of $3.3 million, or
$0.16 per share, in the same period last year.
For the first nine months of 2000, revenues, direct contribution, and EBITDA
increased 32.9 percent, 40.0 percent, and 33.1 percent, respectively, from the
first nine months of 1999.
"We continue to post excellent growth and strong EBITDA cash flow," said Dan
Gerrity, president and CEO of Coinstar. "And we are progressing toward becoming
free cash flow positive."
Third Quarter Developments
During the third quarter, the company's advertising program supported geographic
markets representing approximately two-thirds of its business. "Advertising
continued to have a direct impact on volume, compared with unadvertised control
markets," said Rich Stillman, chief operating officer of Coinstar. "Moreover,
advertising produced gains in consumer awareness and attitudes toward our
services, bringing valuable new customers into the franchise and enhancing
long-term volume growth."
In addition to advertising, Coinstar uses national promotions to attract new
customers. The two promotions completed during the third quarter of 2000--
teaming Coinstar with Disney Channel and Wherehouse Music--lifted volume an
incremental 3 to 5 percent. In the fourth quarter, customers who
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process at least $10 through a participating Coinstar machine will receive a
coupon for a free portrait sitting and 8 x 10 photo at JCPenney Portraits,
valued at $19.95.
"Throughout the year, we have been incorporating learning from our marketing
activities into subsequent decisions," said Stillman. "From that learning, we
plan to optimize our marketing expenditures in the fourth quarter, focusing on
the regions that have performed best all year, thereby reducing our spending
approximately 40 percent from third quarter levels."
As part of its Coins that Count cause-marketing program--which has already
collected more than $1.5 million on behalf of non-profit organizations--Coinstar
announced a nationwide partnership with the American Red Cross. Coinstar's
network is now programmed to serve as a donation point, supporting Red Cross
disaster relief efforts.
Outlook
For the full year, the company expects revenues from its U.S. core business in
excess of $100 million with fourth quarter revenue slightly less than the
seasonally high third quarter number. The company expects U.S. core business
EBITDA for the full year in excess of $21 million.
SUBSIDIARY OPERATIONS
Coinstar International
Revenues more than doubled for the company's 100 percent owned subsidiary,
Coinstar International. In the U.K., Coinstar installed two machines in Asda
Wal-Mart Supercentres during the third quarter and installed four more machines
in October.
Meals.com
Coinstar's 89 percent owned subsidiary, Meals.com, is rapidly building consumer
Web traffic and expanding its relationships with consumer packaged goods
manufacturers and supermarket retailers, as it gains recognition as a leading
Web site for meal planning and recipes.
On October 19, Meals announced it had signed contracts with consumer packaged
goods manufacturers and on-line partners totaling approximately $1 million. The
company expects to recognize these revenues over the next five quarters. "With
these contracts, Meals can continue to generate rapid growth," said Mark Seals,
COO of Meals.
On November 1, Coinstar announced that it had appointed a special committee
comprised of outside directors to explore options relating to Meals. The
committee will evaluate alternatives concerning a potential deconsolidation of
Meals' financial results from the parent company. Coinstar has been advised that
Meals has also appointed a special committee consisting of directors
unaffiliated with Coinstar to evaluate those same opportunities for Meals.
"Given the very different financial characteristics of Meals and the Coinstar
core business, we believe the value of each company could be more easily
recognized by deconsolidation," said Gerrity.
Consolidated Results
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On a consolidated basis (including Coinstar's United States core business and
its two subsidiaries), revenues increased 32.1 percent year-over-year, in the
third quarter of 2000. EBITDA declined 46.8 percent, due primarily to the
consolidation of its rapidly developing subsidiary, Meals.com. The company had a
net loss of $5.9 million, or $0.29 per share, compared with a net loss of $4.6
million, or $0.23 per share, in the third quarter of 1999.
CEO TO STEP DOWN
Separately, Coinstar today announced the resignation of president and CEO, Dan
Gerrity, effective November 15.
"I am proud of all we've accomplished during my seven years at Coinstar, and my
role in helping Coinstar evolve from a small startup with 10 employees and no
revenue to a company with 450 employees approaching $100 million in revenue,"
said Gerrity. "Coinstar has never been in better shape. The company has an
outstanding management team, along with strong growth and financial performance
trends."
"Dan has made an enormous contribution to Coinstar, and I wish him well in his
future pursuits," said Jens Molbak, chairman of Coinstar. "Dan has been
instrumental in Coinstar's success by playing a key role in building the
foundation that will serve Coinstar well in the years to come."
Coinstar's board of directors has formed a search committee with three board
members. Ron Weinstein, Robert Aders, and Jens Molbak will initiate an immediate
search for a new CEO. In the meantime Coinstar's management team led by Rich
Stillman, chief operating officer, Diane Renihan, chief financial officer, and
Carol Lewis, chief administrative officer will be responsible for the daily
operations of the company.
Note: Coinstar will conduct a conference call to discuss third quarter results
on Thursday, November 2, 2000, at 11:00 a.m. eastern/8:00 a.m. pacific. The call
be simulcast on the company's Web site, www.coinstar.com, and be available for
one week.
About Coinstar Inc.
Coinstar Inc. and its subsidiaries, Meals.com and Coinstar International, use
technology to deliver time and money-saving services to consumers in their local
supermarkets. Coinstar's 8,000 strong network of machines is currently available
to 130 million consumers in 43 states and the District of Columbia, as well as
Canada and the United Kingdom.
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This press release contains forward-looking statements that involve a number of
risks and uncertainties. Actual results could differ materially from the results
identified or implied in any forward-looking statement discussed herein. Factors
that could cause or contribute to such differences include, but are not limited
to, risks related to Coinstar's Meals.com subsidiary and other risks that are
more fully described under the caption "Risk Factors" included in the most
recent reports filed with the Securities and Exchange Commission by Coinstar
Inc.
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