SECOND AMENDMENT TO EMPLOYMENT, NON-COMPETITION AND PROPRIETARY RIGHTS AGREEMENT
EXECUTION
COPY
SECOND
AMENDMENT TO EMPLOYMENT, NON-COMPETITION AND
PROPRIETARY
RIGHTS AGREEMENT
This Second Amendment (the “Second
Amendment”), dated as of March 22, 2010, further amends that certain Employment,
Non-Competition and Proprietary Rights Agreement (the “Original Agreement”)
effective as of January 29, 2007, by and between ▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware
corporation (the “Company”), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the “Employee”), as
previously amended by that certain First Amendment to Employment,
Non-Competition and Proprietary Rights Agreement dated as of June 29, 2009, by
and between the Company and Employee (the “First Amendment” and together with
the Original Agreement and this Second Amendment, the
“Agreement”). Capitalized terms used herein and not otherwise defined
shall have the meaning as set forth in the Agreement.
RECITALS
WHEREAS, the Employee is
currently employed as the Chief Financial Officer and Chief Accounting Officer
of the Company pursuant to the terms and conditions set forth in the Original
Agreement, as amended by the First Amendment;
WHEREAS, the Company and the
Employee now wish to further amend the Original Agreement as previously amended
by the First Amendment on the terms and conditions hereinafter set forth; and it
is
NOW, THEREFORE, for and in
consideration of the premises and the mutual covenants and agreements herein
contained, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree that the Agreement
is hereby amended as follows:
1. Section
2.1 of the Agreement is hereby amended, in its entirety, to read as
follows:
“2.1 Term. The term of
employment under this Agreement, and the employment of the Employee hereunder,
shall commence on March 15, 2010 (the “Commencement Date”) and shall expire on
the second (2nd)
anniversary of such Commencement Date, unless sooner terminated in accordance
with Section
2.2 hereof (such term of employment, as it may be extended or terminated,
is herein referred to as the “Employment Term”). Notwithstanding the
foregoing, the Company and the Employee may extend the Employment Term under
this Agreement by executing a written amendment hereto executed by both
parties.”
2. The
second sentence Section 2.2(b) of the Agreement is hereby amended, in its
entirety, to read as follows:
“The
Employee shall be considered to have a Total Disability for purposes of this
Agreement if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months.”
3. Section
2.2(c) of the Agreement is hereby amended, in its entirety, to read as
follows:
“(c) By
the Employee without Good Reason upon thirty (30) days’ written notice to the
Company.”
4. Section
2.2(e) of the Agreement is hereby amended by deleting the last sentence therein
(the definition of “Change in Control”).
5. A
new Section 2.2(g) is hereby added to the Agreement to read as
follows:
“(g) By
the Employee with Good Reason (as defined in Section 2.7(b) of
this Agreement).”
6. Section
2.4 of the Agreement is hereby amended, in its entirety, to read as
follows:
2.4. Cessation of
Compensation. In lieu of any severance under any severance
plan that the Company may then have in effect, and subject to: (i)
the receipt of a full and unconditional release from Employee in form and
substance acceptable to the Company within sixty (60) days following the date of
termination of employment of the Employee and the expiration of any revocation
period applicable thereto; and (ii) any amounts owed by the Employee to the
Company under any contract, agreement or loan document entered into after the
date hereof (including, but not limited to, loans made by the Company to the
Employee), the Company shall pay and provide to the Employee, and the Employee
shall be entitled to receive, the following:
(a) Termination without Good
Reason/Termination For Cause/Expiration of Employment
Term. Upon: (i) termination of the Employee’s
employment by the Employee without Good Reason pursuant to Section 2.2(c)
hereof; (ii) termination of the Employee’s employment by the Company for Cause
pursuant to Section
2.2(f) hereof; or (iii) the expiration of the Employment Term pursuant to
Section 2.2(d),
Employee shall be entitled to receive (a) any accrued yet unpaid base salary
through the date of termination, (b) any accrued yet unpaid bonus payable on
account of any calendar year ending prior to the year in which the termination
occurs (but not any bonus payable on account of any calendar year during which
the termination occurs), (c) benefits through the date of termination, and (d)
reimbursement of reimbursable expenses incurred prior to the date of
termination.
(b) Death/Total
Disability. Upon the termination of the Employment Term by
reason of the death or Total Disability of the Employee pursuant to Sections 2.2(a) or
(b) hereof, the Employee (or, in the case of death, his estate) shall be
entitled to receive (a) any accrued yet unpaid base salary through the date of
death or determination of Total Disability, (b) an amount equal to twelve (12)
months of his then current base salary, (c) any accrued yet unpaid bonus payable
on account of any calendar year ending prior to the year in which the death or
determination of Total Disability occurs, (d) a pro-rata bonus payable on
account of the year in which the death or determination of Total Disability
occurs (assuming for purposes of this subclause (d) that the bonus for such year
equals the average bonus Employee had received each year for the two years
immediately preceding the year in which the death or determination of Total
Disability occurs), (e) benefits through the date of death or determination of
Total Disability, (f) reimbursement of reimbursable expenses incurred prior to
the date of death or determination of Total Disability, and (g) any vacation pay
on account of unused vacation accruing prior to the date of death or
determination of Total Disability.
(c) Without Cause/with Good
Reason. If Employee’s employment is terminated either by the
Company Without Cause pursuant to Section 2.2(e) hereof
or by the Employee with Good Reason pursuant to Section 2.2(g)
hereof, Employee will be entitled to the
following:
(i) payment
of (a) any accrued yet unpaid base salary through the date of termination, (b)
any accrued yet unpaid bonus payable on account of any calendar year ending
prior to the year in which the termination occurs, (c) a pro-rata bonus payable
on account of the year in which the termination occurs (assuming for purposes of
this subclause (c) that the bonus for such year equals the average bonus
Employee had received each year for the two years immediately preceding the year
of the termination of employment), (d) benefits through the date of termination,
(e) reimbursement of reimbursable expenses incurred prior to the date of
termination, and (g) any vacation pay on account of unused vacation accruing
prior to the date of termination; and
(ii) a
severance amount equal to the greater of (a) 2.5 times the sum of (x) his then
current base salary and (y) the average aggregate bonus he had received each
year for the two years immediately preceding the year of termination of
employment; or (b) the amounts he would have been entitled to receive
(base salary, bonus, and vacation pay) for the remainder of the Employment Term
as if he remained employed through the last day of such Employment Term
(assuming for purposes of this subclause (b) that the bonus for each year during
the balance of the Employment Term equals the average bonus Employee had
received each year for the two years immediately preceding the year of the
termination of employment), which severance amount shall be paid in twenty four
(24) equal monthly installments with the first such installment payable on the
first business day of the first month following the date of termination of
employment except as otherwise provided in Section 5.13 of this Agreement;
and
(iii) provided
that Employee makes a timely election to continue coverage under the Company’s
group health plans pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985 (“COBRA”), health insurance benefits with the same coverage (subject
to Company’s right to change coverage as set forth in the last sentence of this
Section) provided to Employee prior to the termination (e.g. medical, dental,
optical, mental health) will be provided at the Company’s cost for eighteen (18)
months following the termination date, but not longer than until Employee is
covered by comparable health insurance benefits from another employer or is
otherwise ineligible for COBRA continuation coverage. Nothing
contained herein shall restrict the ability of the Company or its successor from
changing some or all of the terms of such health insurance benefits, the cost to
participants or other features of such benefits; provided, however, that all
similarly situated participants are treated the same.
To the
extent such release referred to above is executed and no longer subject to
revocation, then the following shall apply notwithstanding anything to the
contrary contained herein:
(a) To
the extent any such cash payment or continuing benefit to be provided is not
“deferred compensation” for purposes of Section 409A of the Code, then such
payment or benefit shall commence upon the first scheduled payment date
immediately after the date the release is executed and no longer subject to
revocation (the “Release
Effective Date”). The first such cash payment shall include
payment of all amounts that otherwise would have been due prior to the Release
Effective Date under the terms of this Agreement had such payments commenced
immediately upon the Employee’s termination of employment, and any
payments made thereafter shall continue as provided herein. The
delayed benefits shall in any event expire at the time such benefits would have
expired had such benefits commenced immediately following the termination of Employee’s
employment.
(b) To
the extent any such cash payment or continuing benefit to be provided is
“deferred compensation” for purposes of Section 409A, then such payments or
benefits shall be made or commence upon the sixtieth (60) day following the
termination of Employee’s
employment. The first such cash payment shall include payment
of all amounts that otherwise would have been due prior thereto under the terms
of this Agreement had such payments commenced immediately upon the termination
of Employee’s employment, and any payments made thereafter shall continue as
provided herein. The delayed benefits shall in any event expire at
the time such benefits would have expired had such benefits commenced
immediately following the termination of Employee’s
employment.”
(c) All payments
and benefits payable hereunder shall be subject to applicable
withholding and employment taxes.
7. A
new Section 2.7(b) is hereby added to the Agreement to read as
follows:
(b) “Good
Reason” for Employee’s termination of employment will be deemed to exist if any
of the following occurs: (i) a material diminution in the Employee’s base
compensation; (ii) a material diminution in the Employee’s authority, duties, or
responsibilities; (iii) a material change in the executive level of the
party to whom the Employee is required to report; (iv) a material
change in the geographic location at which the Employee must perform the
services under this Agreement; or (v) any other action or inaction that
constitutes a material breach by the Company of this Agreement or any other
agreement between the Company and the Employee. For purposes of these
Agreements, Good Reason shall not be deemed to exist unless the Employee’s
termination of employment for Good Reason occurs within one (1) year following
the initial existence of one of the conditions specified in clauses (i) through
(v) above, the Employee provides the Company with written notice of the
existence of such condition within 90 days after the initial existence of the
condition, and the Company fails to remedy the condition within 30 days after
its receipt of such notice.”
8. A
new Section 2.7(c) is hereby added to the Agreement to read as
follows:
(c) “Change
in Control” means any of the following:
(i) The
acquisition by any person of Beneficial Ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of more than fifty
percent (50%) of either (A) the then outstanding shares of common stock of the
Company (the “Outstanding
Company Common Stock”) or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting
Securities”) (the foregoing Beneficial Ownership hereinafter being
referred to as a "Controlling
Interest"); provided, however, that for purposes of this definition, the
following acquisitions shall not constitute or result in a Change of Control:
(x) any acquisition by the Company; (y) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any subsidiary
of the Company; or (z) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A) and (B) of subsection (iii) below;
or
(ii) During
any period of two (2) consecutive years (not including any period prior to the
Commencement Date) individuals who constitute the Company’s board of directors
on the Commencement Date (the “Incumbent Board”) cease for
any reason to constitute at least a majority of the Company’s board of
directors; provided, however, that any individual becoming a director subsequent
to the Commencement Date whose election, or nomination for election by the
Company’s shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Company’s board of
directors; or
(iii) Consummation
of a reorganization, merger, statutory share exchange or consolidation or
similar corporate transaction involving the Company or any of its subsidiaries,
a sale or other disposition of all or substantially all of the assets of the
Company, or the acquisition of assets or stock of another entity by the Company
or any of its subsidiaries (each a “Business Combination”), in
each case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the Beneficial Owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than fifty percent (50%) of the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, and (B) at least a majority of the
members of the Board of Directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Company’s board of
directors, providing for such Business Combination; or
(iv) approval
by the shareholders of the Company of a complete liquidation or dissolution of
the Company.”
9. A
new Section 2.8 is hereby added to the Agreement to read as
follows:
“2.8 Change in Control of the
Company. If
the Employee’s employment is terminated by the Company Without Cause pursuant to
Section 2.2(e)
hereof or by the Employee for Good Reason pursuant to Section 2.2(g)
hereof, in either case during the eighteen (18) month period immediately
following the Change in Control, then in lieu of any amounts otherwise payable
under Section
2.4(c) hereof, the Employee shall be entitled to the
following:
(i) payment
of (a) any accrued yet unpaid base salary through the date of termination, (b)
any accrued yet unpaid bonus payable on account of any calendar year ending
prior to the year in which the termination occurs, (c) a pro-rata bonus payable
on account of the year in which the termination occurs (assuming for purposes of
this subclause (c) that the bonus for such year equals the average bonus
Employee had received each year for the two years immediately preceding the year
of the termination of employment), (d) benefits through the date of termination,
(e) reimbursement of reimbursable expenses incurred prior to the date of
termination, and (g) any vacation pay on account of unused vacation accruing
prior to the date of termination; and
(ii) a
severance amount equal to 2.5 times the sum of (x) his then current base salary
and (a) the greater of (x) the average aggregate bonus he had received each year
for the two years immediately preceding the year of termination of employment,
and (y) the bonus he had received for the year immediately preceding the year of
the termination of employment, which severance amount shall be paid in a lump
sum within ten days following the termination of employment (subject to
applicable withholding and employment taxes); and
(iii) provided
that Employee makes a timely election to continue coverage under the Company’s
group health plans pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985 (“COBRA”), health insurance benefits with the same coverage (subject
to Company’s right to change coverage as set forth in the last sentence of this
Section) provided to Employee prior to the termination (e.g. medical, dental,
optical, mental health) will be provided at the Company’s cost for eighteen (18)
months following the termination date, but not longer than until Employee is
covered by comparable health insurance benefits from another employer or is
otherwise ineligible for COBRA continuation coverage. Nothing
contained herein shall restrict the ability of the Company or its successor from
changing some or all of the terms of such health insurance benefits, the cost to
participants or other features of such benefits; provided, however, that all
similarly situated participants are treated the same.”
10. A
new Section 2.9 is hereby added to the Agreement to read as
follows:
“2.9 Certain Reductions of
Payments.
(i) Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for
the benefit of the Employee, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be
nondeductible by the Company for Federal income tax purposes because of Section
280G of the Code, then the aggregate present value of amounts payable or
distributable to or for the benefit of the Employee pursuant to this Agreement
(such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be
reduced to the Reduced Amount. The “Reduced Amount” shall be an
amount expressed in present value which maximizes the aggregate present value of
Agreement Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code. Anything to the contrary
notwithstanding, if the Reduced Amount is zero and it is determined further that
any Payment which is not an Agreement Payment would nevertheless be
nondeductible by the Company for Federal income tax purposes because of Section
280G of the Code, then the aggregate present value of Payments which are not
Agreement Payments shall also be reduced (but not below zero) to an amount
expressed in present value which maximizes the aggregate present value of
Payments without causing any Payment to be nondeductible by the Company because
of Section 280G of the Code. For purposes of this Section 2.9, present
value shall be determined in accordance with Section 280G(d)(4) of the
Code.
(ii) All
determinations required to be made under this Section 2.9 shall be
made by the Company’s outside independent certified public accounting firm (the
"Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Employee within twenty (20) business days of the date of termination or such
earlier time as is requested by the Company and an opinion to the Employee that
he has substantial authority not to report any excise tax on his Federal income
tax return with respect to any Payments. Any such determination by
the Accounting Firm shall be binding upon the Company and the
Employee. The Employee shall determine which and how much of the
Payments shall be eliminated or reduced consistent with the requirements of this
Section 2.9,
provided that, if the Employee does not make such determination within ten
business days of the receipt of the calculations made by the Accounting Firm,
the Company shall elect which and how much of the Payments shall be eliminated
or reduced consistent with the requirements of this Section 2.9 and shall
notify the Employee promptly of such election. Within five business
days thereafter, the Company shall pay to or distribute to or for the benefit of
the Employee such amounts as are then due to the Employee under this
Agreement. All fees and expenses of the Accounting Firm incurred in
connection with the determinations contemplated by this Section 2.9 shall be
borne by the Company.
(iii) As
a result of the uncertainty in the application of Section 280G of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Payments will have been made by the Company which should not have
been made ("Overpayment") or that
additional Payments which will not have been made by the Company could have been
made ("Underpayment"),
in each case, consistent with the calculations required to be made
hereunder. In the event that the Accounting Firm, based upon the
assertion of a deficiency by the Internal Revenue Service against the Employee
which the Accounting Firm believes has a high probability of success, determines
that an Overpayment has been made, any such Overpayment paid or distributed by
the Company to or for the benefit of the Employee shall be treated for all
purposes as a loan ab initio to the Employee which the Employee shall repay to
the Company together with interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be
deemed to have been made and no amount shall be payable by the Employee to the
Company if and to the extent such deemed loan and payment would not either
reduce the amount on which the Employee is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such taxes. In the
event that the Accounting Firm, based upon controlling precedent or other
substantial authority, determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code.”
11. Section
3.1 of the Agreement is hereby amended by adding the following sentence at the
end of such Section 3.1:
“Employee's
compensation, as set forth on Exhibit A, will be reviewed and may be increased
(but not decreased) as determined by the Board of Directors, on an annual basis
based on the original anniversary date of the effective date of this Agreement
(January 29, 2007)."
12. Section
5.13 of the Agreement is hereby amended, in its entirety, to read as
follows:
“5.13 Compliance with Section
409A.
(i) General. It is the intention of
both the Company and the Employee that the benefits and rights to which the
Employee could be entitled pursuant to this Agreement comply with Section 409A
of the Code and the Treasury Regulations and other guidance promulgated or
issued thereunder (“Section
409A”), to the extent that the requirements of Section 409A are
applicable thereto, and the provisions of this Agreement shall be construed in a
manner consistent with that intention. If the Employee or the Company
believes, at any time, that any such benefit or right that is subject to Section
409A does not so comply, it shall promptly advise the other and shall negotiate
reasonably and in good faith to amend the terms of such benefits and rights such
that they comply with Section 409A (with the most limited possible economic
effect on the Employee and on the Company).
(ii) Distributions on Account of
Separation from Service. If and to the extent required to
comply with Section 409A, no payment or benefit required to be paid under this
Agreement on account of termination of the Employee’s employment shall be made
unless and until the Employee incurs a “separation from service” within the
meaning of Section 409A.
(iii) 6 Month Delay for Specified
Employees if the Company is a Public Company at Separation from
Service. The
following shall only apply to the
extent that the shares of stock of the Company (or any of its affiliates) are
registered on an established securities market or otherwise at the time the
Employee incurs a separation from service:
(1) if (and only to the
extent) any amounts payable to the Employee on account of separation from
service are considered deferred compensation under Section 409A and/or not
within any specified exception from Section 409A, and the Employee is a
“specified employee” at the time of separation from service, then no payment or
benefit shall be made before the date that is six months after the Employee’s
separation from service (or death, if earlier). Any payment or
benefit delayed by reason of the prior sentence shall be paid out or provided in
a single lump sum at the end of such required delay period in order to catch up
to the original payment schedule; and
(2)
for purposes of this provision, the Employee shall be considered to be a
“specified employee” if, at the time of his or her separation from service, the
Employee is a “key employee” within the meaning of Section 416(i) of the Code,
of the Company (or any person or entity with whom the Company would be
considered a single employer under Section 414(b) or Section 414(c) of the
Code).
(iv) No Acceleration of
Payments. Neither the Company nor the Employee, individually
or in combination, may accelerate any payment or benefit that is subject to
Section 409A, except in compliance with Section 409A and the provisions of this
Agreement, and no amount that is subject to Section 409A shall be paid prior to
the earliest date on which it may be paid without violating Section
409A.
(v) Treatment of Each
Installment as a Separate Payment. For purposes of applying the
provisions of Section 409A to this Agreement, each separately identified amount
to which the Employee is entitled under this Agreement shall be treated as a
separate payment. In addition, to the extent permissible under
Section 409A, any series of installment payments under this Agreement shall be
treated as a right to a series of separate payments.
(vi) Taxable
Reimbursements. Any
reimbursements by the Company to the Employee of any eligible expenses under
this Agreement that are not excludable from the Employee’s income for Federal
income tax purposes (the “Taxable Reimbursements”) shall
be made by no later than the last day of the taxable year of the Employee
following the year in which the expense was incurred. The amount of any Taxable
Reimbursements, and the value of any in-kind benefits to be provided to the
Employee, during any taxable year of the Employee shall not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other
taxable year of the Employee. The right to Taxable Reimbursement
shall not be subject to liquidation or exchange for another
benefit.
13. All
other provisions of the Original Agreement and the First Amendment not modified
hereby shall remain unchanged and in full force and effect.
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▇▇▇▇▇▇▇▇.▇▇▇,
INC., a Delaware corporation
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By:
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/s/ ▇▇▇
▇▇▇▇▇▇
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Name: ▇▇▇
▇▇▇▇▇▇
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Title: CEO
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/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
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