Severance Agreement

SEVERANCE AND RELEASE AGREEMENT

A State of Arizona Template – Court-Ready Draft

TABLE OF CONTENTS

I. Document Header
II. Definitions
III. Operative Provisions
IV. Representations & Warranties
V. Covenants & Restrictions
VI. Default & Remedies
VII. Risk Allocation
VIII. Dispute Resolution
IX. General Provisions
X. Execution Block

I. DOCUMENT HEADER

Severance and Release Agreement (“Agreement”), offered to [EMPLOYEE NAME] on [OFFER DATE], by and between [EMPLOYER LEGAL NAME], an [ENTITY TYPE & STATE OF FORMATION] with its principal place of business at [ADDRESS] (“Company”), and [EMPLOYEE NAME], a resident of [STATE] (“Employee”). Company and Employee are sometimes referred to herein individually as a “Party” and collectively as the “Parties.” The “Effective Date” is the eighth calendar day after Employee signs, provided Employee does not timely revoke under § III(D)(5).

Recitals

A. Employee’s employment with Company will terminate effective [TERMINATION DATE] (“Termination Date”).
B. To facilitate an orderly separation and to resolve all matters arising out of the employment relationship, the Parties desire to enter into this Agreement.
C. In exchange for the promises and consideration set forth herein, the sufficiency of which the Parties acknowledge, the Parties agree as follows.

II. DEFINITIONS

For purposes of this Agreement, capitalized terms have the meanings set forth below. Terms defined in the singular include the plural and vice-versa.

“Agreement” has the meaning set forth in the Document Header.

“ADEA” means the federal Age Discrimination in Employment Act, as amended.

“Applicable Law” means applicable federal, state, and local law.

“Confidential Information” means all non-public information regarding Company’s business, customers, finances, trade secrets, or proprietary data, whether oral, written, or electronic, that Employee acquired during employment.

“Consideration Period” has the meaning set forth in § III(D)(4).

“Release” means the mutual release of claims in § VII(A).

“Severance Payment” means the gross sum of $[AMOUNT], less required withholdings, payable pursuant to § III(B)(1).

“Severance Benefits” has the meaning set forth in § III(B)(2).

III. OPERATIVE PROVISIONS

A. Termination of Employment

1. Employment ends on the Termination Date.
2. The Severance Payment does not include wages, commissions, reimbursable expenses, vested benefits, or accrued leave already owed under a controlling plan, policy, or contract. Company must pay wages due within seven working days or by the end of the next regular pay period, whichever is sooner, after a discharge; after a resignation, wages are due no later than the regular payday for the pay period in which employment ended. A.R.S. § 23-353. Employee identifies any known unpaid-compensation issue here: [________________________________].

B. Consideration to Employee

1. Severance Payment. Company shall pay the Severance Payment in [number] equal installments in accordance with normal payroll cycles, commencing on the first payroll date following the Effective Date, provided the Revocation Period (defined below) has expired without revocation.

2. Severance Benefits.
   a. Health-Coverage Subsidy. Company will pay [percentage]% of Employee’s eligible continuation-coverage premiums for [number] months, subject to timely election, the plan, and applicable law.
   b. Outplacement. Company will provide outplacement services for [number] months through [provider].

3. Accrued Benefits. Vested 401(k) and other qualified plan benefits, if any, shall be administered in accordance with plan terms.

4. Tax Withholding. Company will make required withholdings. Benefits and tax counsel must review the payment schedule before use; this template makes no tax-compliance representation to Employee.
5. Additional Consideration. The Severance Payment and Severance Benefits are in addition to anything Employee is already entitled to receive.

C. Company Consideration

1. Mutual Release. See § VII(A).
2. Non-Disparagement Commitment. See § V(B).

D. Statutory Compliance – ADEA/OWBPA

1. Written Agreement. The ADEA waiver must be written in a manner calculated to be understood by Employee.
2. No Prospective Waiver. Nothing herein waives claims arising after Employee signs this Agreement.
3. Attorney Consultation. Company hereby advises Employee in writing to consult with an attorney of Employee’s choosing before signing this Agreement.
4. Consideration Period. Employee has at least 21 calendar days (“Consideration Period”) to review and decide whether to sign. If this waiver is offered in connection with an exit incentive or other employment termination program offered to a group or class of employees, replace 21 days with 45 calendar days. Employee may sign sooner only by a knowing and voluntary choice not induced by Company.
5. Revocation Period. Employee may revoke this Agreement within seven (7) calendar days after signing (“Revocation Period”) by delivering written notice to [Company Contact & Address]. This Agreement is not effective until the Revocation Period expires without revocation.
6. Group Disclosures. For a group or class program, Company must provide at the beginning of the 45-day period a written description of the decisional unit, eligibility factors, applicable time limits, job titles and ages of all individuals eligible or selected, and the ages of all individuals in the same job classifications or organizational unit who were not eligible or selected.

E. Separate Duties

1. Company’s duty to provide severance is conditioned only on Employee’s timely execution and non-revocation.
2. Employee’s duties in § V are enforceable only through the lawful remedies in § VI and do not convert amounts already earned or owed into release consideration.

IV. REPRESENTATIONS & WARRANTIES

A. Mutual Representations

1. Authority. Each Party has full authority to enter into and perform this Agreement.
2. No Assignment of Claims. Each Party represents that it has not assigned any claim released herein.

B. Employee Representations

1. Understanding. Employee has read this Agreement and understands its terms.
2. Voluntariness. Employee enters into this Agreement freely and voluntarily, without coercion.
3. Pending Claims. Employee has disclosed any pending complaint, charge, or claim against Company in [Schedule A] (if any).

C. Survival. The representations and warranties survive the Effective Date for the applicable statute of limitations.

V. COVENANTS & RESTRICTIONS

A. Confidentiality

1. Non-Disclosure. Employee shall protect legitimate trade secrets and non-public proprietary information.
2. Permitted Disclosures. Nothing herein restricts protected communications, government reports, testimony, or other conduct protected by law. Employee may disclose the payment amount to Employee’s attorney, tax advisor, spouse, or as required by law.

B. Mutual Non-Disparagement
During the [SEVERANCE PERIOD], Employee and Company (through its C-Suite and HR executives) shall not knowingly make a false statement of fact intended to harm the other Party’s reputation. This covenant does not restrict truthful statements, government communications, whistleblower reports, testimony, or other conduct protected by law.

C. Return of Property
On or before the Termination Date, Employee will return Company property and delete Company data from personal devices except material that must be preserved by law, litigation hold, or written instruction.

D. Future Cooperation
Upon reasonable advance notice, Employee will provide reasonable factual cooperation concerning matters within Employee’s personal knowledge. Cooperation may not unreasonably interfere with other work, require protected or privileged disclosure, or restrict truthful testimony or government communications. Company will reimburse reasonable out-of-pocket expenses and compensate substantial time at $[RATE] per hour.

E. Post-Employment Restrictions
No prior restrictive covenant is automatically reaffirmed by this Agreement. Any proposed noncompetition, customer nonsolicitation, or similar post-employment restraint requires separate Arizona legal review and must be identified expressly here: [________________________________].

VI. DEFAULT & REMEDIES

A. Events of Default
A Party defaults by materially breaching a lawful obligation under this Agreement.

B. Notice and Cure
The non-breaching Party shall provide written notice and a ten (10) day cure period if the breach can be cured.

C. Remedies
A Party may pursue lawful contract remedies for a proven material breach. No remedy creates a release-challenge penalty, requires repayment merely for filing or participating in an agency matter, or restricts a protected communication. This template creates no prevailing-party fee shift.

VII. RISK ALLOCATION

A. Mutual Release of Claims

1. Released Claims. Except as set forth in § VII(A)(3), and in exchange for the severance consideration, each Party irrevocably releases the other Party and its affiliates, officers, directors, employees, and agents from any and all claims, demands, liabilities, and causes of action, whether known or unknown, based on acts occurring on or before the date Employee signs this Agreement, including claims under the ADEA, the Arizona Civil Rights Act employment provision (A.R.S. § 41-1463), and other federal, state, or local employment laws.
2. Scope. The Release extends to claims arising out of Employee’s employment or termination thereof.
3. Exclusions. The Release does NOT include:
   a. Rights under this Agreement;
   b. Unemployment or workers’ compensation benefits;
   c. Vested benefits under employee pension or welfare plans;
   d. Claims that cannot be waived by law;
   e. Claims arising after Employee signs this Agreement.

B. Protected Rights
Nothing in this Agreement prevents Employee from filing a charge, communicating with, providing information to, or participating in an investigation or proceeding before a government agency. Nothing interferes with agency enforcement authority. Any effect of the Release on individual monetary recovery is governed by applicable law.

C. No Employee Risk-Shifting
This Agreement does not impose employee indemnity, a liability cap, a force-majeure excuse for payment, a severance clawback, or a penalty for a good-faith challenge to the Release. The rules governing ADEA waiver challenges remain controlled by 29 C.F.R. § 1625.22.

VIII. DISPUTE RESOLUTION

A. Governing Law
This Agreement is governed by the laws of the State of Arizona and applicable federal law, without regard to conflict-of-law principles.

B. Forum
An action concerning this Agreement may be filed in an Arizona state or federal court with subject-matter and personal jurisdiction and proper venue.

C. Arbitration
No arbitration clause is included. If selected, use a separately reviewed addendum addressing formation, costs, discovery, remedies, and governing law.

D. Jury Trial Waiver
No predispute jury waiver is included in this template.

E. Protected Rights
Nothing in this Article restricts agency access, protected communications, or claims and remedies that cannot be waived privately.

IX. GENERAL PROVISIONS

A. Amendments & Waivers
No amendment or waiver is effective unless in a writing signed by both Parties. A waiver on one occasion is not a waiver on any other occasion.

B. Assignment
Employee may not assign or delegate any rights or obligations without Company’s prior written consent. Company may assign to a successor in interest.

C. Successors & Assigns
This Agreement binds and benefits the Parties and their respective successors and permitted assigns.

D. Severability
If any provision is held unenforceable, the remainder remains in effect to the extent permitted by law. This clause does not authorize expansion of a release or restraint.

E. Entire Agreement
This Agreement constitutes the entire understanding of the Parties and supersedes all prior agreements relating to the subject matter.

F. Counterparts & Electronic Signatures
The Parties may execute this Agreement in counterparts, each of which is deemed an original. Signatures delivered electronically or by facsimile are binding.

X. EXECUTION BLOCK

IN WITNESS WHEREOF, the Parties have executed this Severance and Release Agreement as of the dates set forth below.

[Optional acknowledgment block if required by internal policy.]

Sources and References

• 29 U.S.C. § 626(f)
• 29 C.F.R. § 1625.22
• A.R.S. § 23-353
• A.R.S. § 41-1463