Exhibit 10.1

 

SEPARATION AGREEMENT

 

This Separation Agreement (the “Agreement”) is entered into on this 10th day of
November, 2010, by and among Morningstar Associates, LLC, a Delaware limited
liability company (the “Company”), Morningstar, Inc., an Illinois corporation
and the sole member of the Company (the “Parent”), and Patrick Reinkemeyer (the
“Executive”).

 

WHEREAS, the Executive is currently employed as the President of the Company and
an executive officer of the Parent; and

 

WHEREAS, the Company, Parent and the Executive desire to set forth herein their
mutual agreement with respect to the matters addressed herein, including matters
pertaining to the Executive’s cessation of his employment and positions with the
Company and Parent, certain other matters pertaining to the Executive’s
consulting relationship with the Company and Parent  following the Executive’s
cessation of employment and the Executive’s release of claims, all upon the
terms set forth herein.

 

NOW, THEREFORE, in consideration of the mutual promises and agreements contained
herein, the adequacy and sufficiency of which are hereby acknowledged, the
Company, Parent and the Executive hereby agree as follows:

 

1.  Termination of Employment and Service.  As of December 15, 2010 (the “Date
of Termination”), the Executive shall cease to be an employee and officer of the
Parent and Company.

 

2.  Payment of Accrued Amounts; Accrued Benefits; Stock Options.  Not later than
30 days after the Date of Termination, the Company shall pay to the Executive
all amounts, if any, due to the Executive for earned salary through the Date of
Termination. Executive’s rights to receive benefits accrued or payable under the
Company’s employee benefit plans shall be governed by the terms of such plans.
Stock options held by Executive and which have vested as of the Date of
Termination shall remain exercisable in accordance with the terms of the
Parent’s 2004 Stock Incentive Plan.  In addition, not later than 30 days after
the Date of Termination, the Company shall reimburse the Executive in accordance
with the Company’s policies and procedures for all proper expenses incurred by
the Executive in the performance of his duties through the Date of Termination.

 

3.  Post-Termination Benefits.

 

(a)  Severance Payments.  The Company shall pay to the Executive a cash payment
in an aggregate gross amount equal to $2.2 million, consisting of an incentive
bonus equal to $250,000 and a severance payment equal to $1,950,000
(collectively, the “Severance Benefit”).  The Severance Benefit shall be payable
as follows: (i) $1.1 million of the Severance Benefit shall be paid in a lump
sum cash payment no later than December 31, 2010; and (ii) the remaining $1.1
million of the Severance Benefit shall be payable over the period commencing on
the first payroll date following January 1, 2011 and ending on the last payroll
date immediately preceding December 31, 2011, with such amounts payable in
substantially equal installments and in accordance with the Company’s normal
payroll practices.

 

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(b)  Employee Benefits.  Provided that the Executive timely elects to receive
continued coverage under the Company’s group medical and dental plans pursuant
to the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended
(“COBRA”), the Company shall pay to the Executive, as an additional severance
benefit, a cash payment equal to the difference between the cost of COBRA
premiums and the cost of active employee premiums for 12 months of COBRA
coverage, as calculated by the Company as of the Date of Termination.  Such
payment shall constitute taxable income to the Executive and shall be paid in a
lump sum prior to December 31, 2010. If the Executive is entitled to any benefit
under the current terms and conditions of any employee benefit plan of the
Parent or Company that is accrued and vested on the Date of Termination and that
is not expressly referred to in this Agreement, such benefit shall be provided
to the Executive in accordance with the terms and conditions of such employee
benefit plan.

 

(c)  Compliance with Agreement.  Notwithstanding anything herein to the
contrary, if the Executive breaches the terms of this Agreement and the
Executive does not cure such breach (if curable) within 30 days after receipt of
written notice from the Company describing such breach, the Executive shall
forfeit any and all rights to the post-termination payments made or to be made
pursuant to this Section 3.

 

4.  Consulting Arrangement.

 

(a)  Consulting Services. The Parent and Company hereby agree to retain the
Executive as a consultant, and the Executive hereby agrees to be retained by the
Parent and Company, upon the terms and subject to the conditions hereof for the
period commencing on the Date of Termination and ending on the date that is
twelve (12) months following the Date of Termination, unless earlier terminated
pursuant to this Section 4 (such period, the “Consulting Period”).  During the
Consulting Period, the Executive shall make himself available at mutually
acceptable times to perform consulting services with respect to the businesses
conducted by the Parent and Company; provided, however, that  such consulting
services shall not exceed 10 hours per month.  Subject to the prior approval of
the Parent and in accordance with Section 19 of the Agreement, the Parent shall
reimburse the Executive in accordance with the Parent’s policies and procedures
for all proper expenses incurred by the Executive in the performance of his
consulting duties during the Consulting Period. In accordance with the terms of
this Agreement, the Executive shall comply with reasonable requests for the
Executive’s consulting services and shall devote his reasonable best efforts,
skill and attention to the performance of such consulting services; provided,
however, that nothing in this Section 4 shall preclude Executive from accepting
employment with or providing services to any other person or entity (provided
such employment or services are not prohibited by Section 10 hereof) and Parent
and Company agree that any consulting services requested hereunder shall not
interfere with Executive’s employment or services.  The Executive shall take his
direction as a consultant solely from the Parent’s Chief Executive Officer or
the President of Parent’s Global Investment Management Division and shall not
interact with any of the Parent’s or Company’s other employees or directors in
his capacity as a consultant, except to the extent he is directed to do so by
the Chief Executive Officer.

 

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(b)  Termination.  This Section 4 may be terminated at any time (i) by the
Executive on 30 days prior written notice to the Parent and (ii) by the Parent
upon written notice to the Executive.

 

5.  Federal and State Withholding.  The Company shall deduct from any
compensation payable by the Company to the Executive the amount of all taxes
required to be withheld under applicable law with respect to such payments.  For
purposes of determining all applicable tax withholdings, any compensation
recognized by the Executive upon the exercise of the Executive’s stock options
in accordance with the terms of the Parent’s 2004 Stock Incentive Plan and the
amounts to be paid to Executive pursuant to Section 3  hereof shall be treated
as wages subject to all applicable withholding requirements.

 

6.  Return of Parent and Company Property.  Promptly following the Termination
Date (but in no event later than three business days following such date), the
Executive shall return to the Parent all property of the Parent and Company in
the Executive’s possession or under the Executive’s control, including but not
limited to any office, computing or communications equipment; provided, however,
Parent or the Company shall take reasonable efforts to transfer to Executive the
right to continue to use the phone number for his Company-provided cellular
phone.

 

7.  Release of Claims.

 

The Executive, on behalf of himself and anyone claiming through him, including,
but not limited to, his past, present and future spouses, family members,
relatives, agents, attorneys, representatives, heirs, executors and
administrators, and the predecessors, successors and assigns of each of them,
hereby releases and agrees not to sue the Company, Parent or any of their
divisions, subsidiaries, affiliates, other related entities (whether or not such
entities are wholly owned) or the owners, officers, directors, agents, attorneys
or representatives thereof, or the predecessors, successors or assigns of each
of them (hereinafter jointly referred to as the “Company Released Parties”),
with respect to any and all known or unknown claims which the Executive now has,
has ever had, or may in the future have, against any of the Company Released
Parties for or related in any way to anything occurring from the beginning of
time up to and including the date on which he signs this Agreement, including,
without limiting the generality of the foregoing, any and all claims which in
any way result from, arise out of, or relate to, the Executive’s employment by
any of the Company Released Parties or the termination of such employment,
including, but not limited to, any and all claims for severance or termination
payments under any agreement between the Executive and any of the Company
Released Parties or any program or arrangement of any of the Company Released
Parties or any claims that could have been asserted by the Executive or on his
behalf against any of the Company Released Parties in any federal, state or
local court, commission, department or agency under any fair employment,
contract or tort law, or any other federal, state or local law, regulation or
ordinance (as in effect or amended from time to time), including, without
limitation, the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, the Employee Retirement Income Security Act of 1974, the
Americans with Disabilities Act, the Family and Medical Leave Act, or under any
compensation, bonus, severance, retirement or other benefit plan; provided,
however, that nothing contained in this Section 7 shall apply to, or release the
Company or Parent from (i) any obligation contained in this Agreement, (ii) any

 

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obligation which the Company or Parent may have to provide benefits to the
Executive under any plans or programs of the Company or Parent which continue to
be applicable to the Executive, except as otherwise expressly provided in this
Agreement, (iii) any obligation which the Parent or the Company may have to
indemnify the Executive pursuant to their articles of incorporation, by-laws,
operating agreement or other governing documents or the 2005  indemnification
agreement entered into with Executive;  or (iv) any obligation which the Company
or Parent may have to provide coverage to the Executive pursuant to their
director and officer insurance policy with respect to actions or omissions of
the Executive during his service as an officer or director of the Company or
Parent.  The Executive expressly represents and warrants that he has not filed
or had filed on his behalf any claim against any of the Company Released
Parties, and has not transferred or assigned any rights or causes of action that
he might have against any of the Company Released Parties.

 

Executive represents that he has had the opportunity and time to consult with
his own legal counsel concerning the provisions of this Agreement and that he
has been given up to twenty-one (21) days from the date of the Company’s
signature as set forth below to consider this Agreement and determine whether to
accept and sign this Agreement.  Following his acceptance and signing of this
Agreement, Executive has seven (7) calendar days to revoke the Agreement by
delivering notice of revocation to the Company in accordance with Section 13.

 

8.  Authority.  The Executive expressly represents and warrants that the
Executive is the sole owner of the actual and alleged claims, demands, rights,
causes of action and other matters that are released herein; that the same have
not been transferred or assigned or caused to be transferred or assigned to any
other person, firm, corporation or other legal entity; and that the Executive
has the full right and power to grant, execute and deliver the general release,
undertakings and agreements contained herein.

 

9.  Non-Admissions.  Nothing in this Agreement is intended to or shall be
construed as an admission by the Parent or Company or any of the other Company
Released Parties that any of them violated any law, interfered with any right,
breached any obligation or otherwise engaged in any improper or illegal
conduct.  The Company, Parent, and the other Company Released Parties expressly
deny any such illegal or wrongful conduct.

 

10.  Noncompetition and Nonsolicitation.

 

(a)  The Executive agrees, on behalf of himself and his affiliates, that for a
period of twelve (12) months following the Date of Termination, neither the
Executive nor any of his affiliates will directly or indirectly (whether as
principal, agent, independent contractor, partner, employee, consultant or
otherwise) perform for any of the organizations set forth in Exhibit A attached
hereto or any affiliates of such organizations, the same or substantially the
same functions or job duties, with respect to competitive products or services,
that the Executive performed for the Parent or Company; provided, however, that
nothing set forth in this Section 10(a) shall prohibit the Executive or any of
his affiliates from owning not in excess of 2% in the aggregate of any class of
capital stock of any corporation if such stock is publicly traded and listed on
any national or regional stock exchange. For purposes of this Section 10(a), a
competing product or service is a product or service which replaces a product or
service which is being provided by the Parent or Company as of the Date of
Termination.

 

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(b)  The Executive agrees, on behalf of himself and his affiliates, that for a
period of twelve (12) months following the Date of Termination, neither the
Executive nor any of his affiliates will directly or indirectly solicit, attempt
to solicit, induce or encourage any person who is in the employ or service of
the Parent, Company or any of their affiliates, or any of their respective
consultants or independent contractors, to terminate his or her relationship
with the Parent, Company or any of their affiliates (as the case may be) or
become employed by the Executive, any of his affiliates, or any other person.

 

(c)  It is expressly understood and agreed that the restrictions contained in
this Section 10 are reasonable and necessary to protect the business of the
Parent, Company and their affiliates.  Accordingly, if a final judicial
determination is made that the time, territory, scope or any other restriction
contained in this Section 10 is unreasonable or otherwise unenforceable, neither
this Agreement nor the provisions of this Section 10 shall be rendered void, but
shall be deemed amended to apply as to such maximum scope, time and territory
and to such other extent as such court may judicially determine or indicate to
be reasonable, or if the court or other governmental authority does not so
determine or indicate, to the maximum extent which any pertinent statute or
judicial decision may indicate to be a reasonable restriction under the
circumstances involved, and as so modified, the restrictions contained in this
Section shall be binding and enforceable.

 

(d)  The Executive agrees and acknowledges that remedies at law for any breach
of his obligations under this Section 10 are inadequate and that in addition
thereto the Parent, Company and their affiliates shall be entitled to seek
equitable relief, including injunction and specific performance, in the event of
any such actual or threatened breach.  The Executive acknowledges that the
covenants set forth in this Section 10 are an essential element of this
Agreement and that, but for the agreement of the Executive to comply with these
covenants, the Parent and Company would not have entered into this Agreement. 
The Executive acknowledges that this Section 10 constitutes an independent
covenant and shall not be affected by performance or nonperformance of any other
provision of this Agreement by the Parent or Company.

 

11.  Confidentiality; Assignment of Rights.

 

(a)  The Executive shall not disclose to anyone or make use of any trade secret
or proprietary or confidential information of the Parent, Company and their
affiliates, including such trade secret or proprietary or confidential
information of any customer or other entity to which the Parent, the Company or
one of their affiliates owes an obligation not to disclose such information,
which the Executive acquired during the term of his employment by the Company,
including but not limited to records kept in the ordinary course of business,
except (i) when required to do so by a court of law, by any governmental agency
having supervisory authority over the business of the Company or by any
administrative or legislative body (including a committee thereof) with apparent
jurisdiction to order him to divulge, disclose or make accessible such
information, or (ii) as to such confidential information that becomes generally
known to the public or trade without violation of this Section 11.

 

(b)  The Executive hereby sells, assigns and transfers to the Company all of his
right, title and interest in and to all inventions, discoveries, improvements
and copyrightable subject matter (the “rights”) which during the term of his
employment by the Company were

 

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made or conceived by him, alone or with others, and which are within or arise
out of any general field of the Company’s business or arise out of any work he
performs or information he received regarding the business of the Company while
employed by the Company.  The Executive shall fully disclose to the Company as
promptly as available all information known or possessed by him concerning the
rights referred to in the preceding sentence, and upon request by the Company
and without any further remuneration in any form to him by the Company, but at
the expense of the Company, execute all applications for patents and for
copyright registration, assignments thereof and other instruments and do all
things which the Company may deem necessary to vest and maintain in it the
entire right, title and interest in and to all such rights.

 

12.  Nondisparagement.

 

(a)  The Executive will not, nor will he cause or assist any other person to,
make any statement to a third party or take any action which is intended to or
would reasonably have the effect of disparaging or harming the Parent or Company
or the business reputation of the Parent or Company; provided, however, that
this provision shall not preclude such truthful disclosure or testimony as may
be required by a court of law, by any governmental agency having supervisory
authority over the business of the Parent or Company or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction to
order him to make such disclosure or provide such testimony.

 

(b)  The Parent and Company will not, nor will they cause or assist any other
person to, make any statement to a third party or take any action which is
intended to or would reasonably have the effect of disparaging or harming the
Executive or his business reputation; provided, however, that this provision
shall not preclude such truthful disclosure or testimony as may be required by a
court of law, by any governmental agency having supervisory authority over the
business of the Parent or Company or by any administrative or legislative body
(including a committee thereof) with apparent jurisdiction to order the Parent
or Company to make such disclosure or provide such testimony.

 

13.  Notices.  All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when (a) delivered
personally or by overnight courier to the following address of the other parties
hereto (or such other address for such parties as shall be specified by notice
given pursuant to this Section) or (b) sent by facsimile to the following
facsimile number of the other parties hereto (or such other facsimile number for
such parties as shall be specified by notice given pursuant to this Section),
with the confirmatory copy delivered by overnight courier to the address of such
parties pursuant to this Section 13:

 

If to the Parent or Company, to:

 

Morningstar, Inc.

22 West Washington Street

Chicago, IL 60602

Attn:  General Counsel

Facsimile:  (312) 244-8032

 

If to Executive, to:

 

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Patrick Reinkemeyer

At the most recent address on file with the Company

 

14.  Severability.  Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Agreement or the
validity, legality or enforceability of such provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

15.  Entire Agreement.  This Agreement shall constitute the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements (including, without
limitation, all equity award agreements between the Parent or Company and the
Executive) or representations by or between the parties, written or oral, which
may have related in any manner to the subject matter hereof.  The Executive
acknowledges that neither the Parent nor Company has made any representations
regarding the tax consequences of payments under this Agreement and that
Executive has had the opportunity to consult Executive’s tax advisor, if any.

 

16.  Successors and Assigns.  This Agreement shall be enforceable by Executive
and Executive’s heirs, executors, administrators and legal representatives, and
by the Company and Parent and their successors and assigns.  Executive may not
assign this Agreement and any such assignment shall be null and void.

 

17.  Governing Law.  This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Illinois without
regard to principles of conflict of laws.

 

18.  Amendment and Waiver.  The provisions of this Agreement may be amended or
waived only by the written agreement of the Company, Parent and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.

 

19.  Section 409A.  This Agreement is intended to comply with the requirements
of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”),
and shall be interpreted and construed consistently with such intent.  The
payments to the Executive pursuant to this Agreement are also intended to be
exempt from Section 409A of the Code to the maximum extent possible, under
either the separation pay exemption pursuant to Treasury regulation
§1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation
§1.409A-1(b)(4), and for purposes of the separation pay exemption, each
installment paid to the Executive under this Agreement shall be considered a
separate payment.    In the event the terms of this Agreement would subject the
Executive to taxes or penalties under Section 409A of the Code (“409A
Penalties”), the Parent, Company and Executive shall cooperate diligently to
amend the terms of the Agreement to avoid such 409A Penalties, to the extent
possible; provided that in no event shall the Parent or Company be responsible
for any 409A Penalties that arise in

 

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connection with any amounts payable under this Agreement.  To the extent any
amounts under this Agreement are payable by reference to Executive’s “Date of
Termination,” such term shall be deemed to refer to the Executive’s “separation
from service,” within the meaning of Section 409A of the Code.  Notwithstanding
any other provision in this Agreement, in no event shall the level of consulting
services to be provided by the Executive pursuant to Section 4 of this Agreement
exceed more than 20% of the average of services performed by the Executive for
the Parent, Company and their affiliated “service recipients” (within the
meaning of Treasury regulation §1.409A-1(h)(3)) over the immediately preceding
36-month period.  Notwithstanding any other provision in this Agreement, if the
Executive is a “specified employee,” as defined in Section 409A of the Code, as
of the date of the Executive’s separation from service, then to the extent any
amount payable under this Agreement (i) constitutes the payment of nonqualified
deferred compensation, within the meaning of Section 409A of the Code, (ii) is
payable upon the Executive’s separation from service and (iii) under the terms
of this Agreement would be payable prior to the six-month anniversary of the
Executive’s separation from service, such payment shall be delayed until the
earlier to occur of (a) the six-month anniversary of the separation from service
or (b) the date of the Executive’s death.  Any reimbursement payable to the
Executive pursuant to this Agreement shall be conditioned on the submission by
the Executive of all expense reports reasonably required by the Parent or
Company under any applicable expense reimbursement policy, and shall be paid to
the Executive within 30 days following receipt of such expense reports, but in
no event later than the last day of the calendar year following the calendar
year in which the Executive incurred the reimbursable expense.  Any amount of
expenses eligible for reimbursement, or in-kind benefit provided, during a
calendar year shall not affect the amount of expenses eligible for
reimbursement, or in-kind benefit to be provided, during any other calendar
year.  The right to any reimbursement or in-kind benefit pursuant to this
Agreement shall not be subject to liquidation or exchange for any other benefit.

 

20.  Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

 

 

 

MORNINGSTAR, INC.

 

 

 

 

 

By:

/s/ Joe Mansueto

 

Name: Joe Mansueto

 

Its: Chairman and Chief Executive Officer

 

 

 

 

 

 

 

MORNINGSTAR ASSOCIATES, LLC

 

 

 

By: Morningstar, Inc. (as sole member of Morningstar Associates, LLC)

 

 

 

 

 

 

 

By:

/s/ Joe Mansueto

 

Name: Joe Mansueto

 

Its: Chairman and Chief Executive Officer

 

 

 

 

 

 

 

/s/ Patrick Reinkemeyer

 

Patrick Reinkemeyer

 

 

[SIGNATURE PAGE TO PATRICK REINKEMEYER SEPARATION AGREEMENT]

 

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EXHIBIT A

 

AEGON

 

Ameriprise Financial, Inc.

 

Financial Engines, Inc.

 

GuidedChoice

 

ING Groep N.V.

 

Mercer LLC

 

Mesirow Financial Holdings, Inc.

 

Metropolitan Life Insurance Company

 

New York Life Insurance Company

 

TD Ameritrade, Inc.

 

The Hartford Financial Services Group

 

The Northwestern Mutual Life Insurance Company

 

Wachovia Bank, a division of Wells Fargo Bank, N.A.

 

Wilshire Associates Incorporated

 

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