Exhibit 10.4

 

Change of Control Agreement

 

THIS CHANGE OF CONTROL AGREEMENT (this “Agreement”) by and between Boston
Communications Group, Inc. (the “Company”), a Massachusetts Corporation with its
principal place of business at 55 Middlesex Turnpike, Bedford, MA 01730, and
Paul J. Tobin (the “Executive”), is made as of May 3, 2005 (the “Effective
Date”).

 

WHEREAS, the Company recognizes that the possibility of an acquisition of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among certain personnel, may result in the departure or
distraction of personnel to the detriment of the Company and its stockholders,
and

 

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that
appropriate steps should be taken to reinforce and encourage the continued
employment and dedication of the Executive and the Executive’s continued efforts
to maximize the Company’s value.

 

NOW, THEREFORE, as an inducement for and in consideration of the Executive
remaining in its employ, the Company agrees that the Executive shall receive the
benefits set forth in this Agreement upon a Change in Control (as defined in
Section 1.2).

 

  5. Key Definitions.

 

As used herein, the following terms shall have the following respective
meanings:

 

  a. “Cause” means:

 

  i. A good faith finding by a majority of the Board (excluding the vote of the
Executive, if then a member of the Board) that (1) the Executive has refused
without good reason to perform his or her reasonably assigned material duties
for the Company; (2) the Executive has engaged in gross negligence or willful
misconduct, which has or is expected to have a material detrimental effect on
the Company, (3) the Executive has engaged in fraud, embezzlement or other
material dishonesty, (4) the Executive has engaged in any conduct which would
constitute grounds for termination for violation of the Company’s policies in
effect at that time; or (5) the Executive has breached any material provision of
any nondisclosure, invention assignment, non-competition or other similar
agreement between the Executive and the Company and, if amenable to cure, has
not cured such breach after reasonable notice from the Company; or

 

  ii. The conviction by the Executive of, or the entry of a pleading of guilty
or nolo contendre by the Executive to, any crime involving moral turpitude or
any felony.

 

  b. As used herein, “Change in Control” shall mean the occurrence of any one of
the following events:

 

  i. Any “person” who is not the “beneficial owner” of more than ten percent
(10%) of the outstanding equity securities of the Company on a fully diluted
basis on the date hereof or an “affiliate” of such party on the date hereof
becomes, alone or together with such person’s affiliates, a “beneficial owner”
of more than fifty percent (50%) of the outstanding equity securities of the
Company (as such terms are defined in Section 13(d) of the Securities Exchange
Act of 1934, as amended, and the regulations promulgated thereunder); or

 

  ii. In a single transaction, the consummation of a merger, consolidation or
share exchange involving the Company, or the sale of all or substantially all of
the assets of the Company, unless the stockholders of the Company immediately
prior to the transaction own fifty percent (50%) or more of the outstanding
equity securities of the continuing entity immediately following the
consummation of such transaction.

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  c. “Change of Control Date” means the first date during the Term (as defined
in Section 1.4) on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (a) a Change in Control occurs, (b) the
Executive’s employment with the Company is terminated prior to the date on which
the Change in Control occurs, and (c) it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control or
(ii) otherwise arose in connection with or in anticipation of a Change in
Control, then for all purposes of this Agreement the “Change in Control Date”
shall mean the date immediately prior to the date of such termination of
employment.

 

  d. Term of Agreement. This Agreement, and all rights and obligations of the
parties hereunder, shall take effect upon the Effective Date and shall expire
upon the first to occur of (a) the expiration of the Term (as defined below) if
a Change in Control has not occurred during the term, (b) the termination of the
Executive’s employment with the Company prior to the Change in Control Date, (c)
the termination of the Executive’s employment with the Company after the Change
of Control Date without Cause or for Good Reason, (d) the date twenty-four (24)
months after the Change in Control Date, if the Executive is still employed by
the Company as of such later date, or (e) the fulfillment by the Company of all
of its obligations under Section 2 if the Executive’s employment with the
Company terminates within twenty-four (24) months following the Change in
Control Date. “Term” shall mean the period commencing as of the Effective Date
and continuing in effect through May 3, 2010 provided, however, that commencing
on May 3, 2010 and each May 3rd thereafter, the Term shall be automatically
extended for one additional year unless, not later than 90 days prior to the
scheduled expiration of the Term (or any extension thereof), the Company shall
have given the Executive written notice that the Term will not be extended.

 

  e. “Good Reason” means the occurrence, without the Executive’s written
consent, of any of the events or circumstances set forth in clauses (a) through
(c) below

 

  i. relocation of the Executive’s primary place of business to a location that
results in an increase in the Executive’s daily one way commute of at least
fifty (50) miles;

 

  ii. any material breach by the Company or any successor thereto of any
agreement entered into after the Effective Date (or in the case of any agreement
to provide benefits to the Executive, entered into at any time) to which the
Executive and the Company are parties, which breach is not cured within ten days
after written notice thereof; or

 

  iii. Any material adverse change in the Executive’s authority, duties or
annual base salary (including, but not limited to, any failure to pay
compensation on at least a monthly basis) as in effect prior to the Change in
Control.

 

  6. Termination Without Cause or for Good Reason After a Change in Control. If
at any time prior to the expiration of twenty-four (24) months following a
Change of Control Date, the Company terminates the Executive’s employment
without Cause or the Executive terminates his or her employment for Good Reason,
the Company will provide benefits as follows provided the Executive executes a
release of claims drafted by the Company’s counsel and it becomes binding:

 

  10.13   Payment

 

  a. Within 30 days following the termination of employment, the Company will
pay to the Executive a lump-sum cash amount equal to 200% of the Executive’s
annual base salary in effect at the time of the termination of employment (or if
the Executive’s annual base salary has been reduced within 61 days prior to the
termination, the base salary in effect immediately prior to the reduction), less
all applicable state and federal taxes.

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  b. The Executive will be paid his or her prorated target bonus due for the
calendar year until his or her date of termination, less all applicable state
and federal taxes. For example, an executive who is terminated on March 31 would
be paid 25% of the prorated target bonus not yet paid for the applicable year.
An executive who is terminated on June 30 would be paid 50% of the prorated
target bonus not yet paid for the applicable year. Any other bonuses or
commission earned but not yet paid will be paid to the Executive upon
termination.

 

  c. The Company will continue for a period of 24 months following the date of
termination to provide the Executive with any medical, dental and disability and
life insurance benefits in effect at the time of his or her termination (or, if
his or her level of benefits has been reduced within 61 days of the termination,
his or her level of benefits in effect prior to the reduction). If the Company
is unable to continue any such benefit or benefits, the Company will instead pay
to the Executive, within 30 days of termination, a lump sum cash payment equal
to the greater of the Company’s cost of such benefits or the Executive’s
individual replacement cost for such benefits. All other benefits will cease
upon termination.

 

  d. Any options to purchase Company stock or restricted stock of the Company
held by the Executive under the Company’s stock compensation plans and
arrangements will become immediately exercisable notwithstanding any contrary
provisions in the documents otherwise governing the options and will remain
exercisable for the period of time during which such options would otherwise
have been exercisable had the Executive remained in the employ of the Company.

 

  10.14 Taxes.

 

  a. Notwithstanding any other provision of this Agreement, except as set forth
in Section 2.2(b), in the event that the Company undergoes a “Change in
Ownership or Control” (as defined below), the Company shall not be obligated to
provide to the Executive a portion of any “Contingent Compensation Payments” (as
defined below) that the Executive would otherwise be entitled to receive to the
extent necessary to eliminate any “excess parachute payments” (as defined in
Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the
“Code”)) for the Executive. For purposes of this Section 2.2, the Contingent
Compensation Payments so eliminated shall be referred to as the “Eliminated
Payments” and the aggregate amount (determined in accordance with Proposed
Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision) of the
Contingent Compensation Payments so eliminated shall be referred to as the
“Eliminated Amount.”

 

  b. Notwithstanding the provisions of Section 2.2(a), no such reduction in
Contingent Compensation Payments shall be made if (i) the Eliminated Amount
(computed without regard to this sentence) exceeds (ii) 110% of the aggregate
present value (determined in accordance with Proposed Treasury Regulation
Section 1.280G-1, Q/A-31 and Q/A-32 or any successor provisions) of the amount
of any additional taxes that would be incurred by the Executive if the
Eliminated Payments (determined without regard to this sentence) were paid to
him or her (including, state and federal income taxes on the Eliminated
Payments, the excise tax imposed by Section 4999 of the Code payable with
respect to all of the Contingent Compensation Payments in excess of the
Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code), and
any withholding taxes). The override of such reduction in Contingent
Compensation Payments pursuant to this Section 2.2(b) shall be referred to as a
“Section 2.2(b) Override.” For purpose of this paragraph, if any federal or
state income taxes would be attributable to the receipt of any Eliminated
Payment, the amount of such taxes shall be computed by multiplying the amount of
the Eliminated Payment by the maximum combined federal and state income tax rate
provided by law.

 

  c. For purposes of this Section 2.2 the following terms shall have the
following respective meanings:

 

  (i) “Change in Ownership or Control” shall mean a change in the ownership or
effective control of the Company or in the ownership of a substantial portion of
the assets of the Company determined in accordance with Section 280G(b)(2) of
the Code.

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  (ii) “Contingent Compensation Payment” shall mean any payment (or benefit) in
the nature of compensation that is made or made available (under this Agreement
or otherwise) to a “disqualified individual” (as defined in Section 280G(c) of
the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i)
of the Code) on a Change in Ownership or Control of the Company.

 

  f. Any payments or other benefits otherwise due to the Executive following a
Change in Ownership or Control that could reasonably be characterized (as
determined by the Company) as Contingent Compensation Payments (the “Potential
Payments”) shall not be made until the dates provided for in this Section
2.2(d). Within 30 days after each date on which the Executive first becomes
entitled to receive (whether or not then due) a Contingent Compensation Payment
relating to such Change in Ownership or Control, the Company shall determine and
notify the Executive (with reasonable detail regarding the basis for its
determinations) (i) which Potential Payments constitute Contingent Compensation
Payments, (ii) the Eliminated Amount and (iii) whether the Section 2.2(b)
Override is applicable. Within 30 days after delivery of such notice to the
Executive, the Executive shall deliver a response to the Company (the “Executive
Response”) stating either (A) that he or she agrees with the Company’s
determination pursuant to the preceding sentence, in which case he or she shall
indicate, if applicable, which Contingent Compensation Payments, or portions
thereof (the aggregate amount of which, determined in accordance with Proposed
Treasury Regulation Section 1.280G-1, Q/A-30 or any successor provision, shall
be equal to the Eliminated Amount), shall be treated as Eliminated Payments or
(B) that he or she disagrees with such determination, in which case he or she
shall set forth (i) which Potential Payments should be characterized as
Contingent Compensation Payments, (ii) the Eliminated Amount, (iii) whether the
Section 2.2(b) Override is applicable, and (iv) which (if any) Contingent
Compensation Payments, or portions thereof (the aggregate amount of which,
determined in accordance with Proposed Treasury Regulation Section 1.280G-1,
Q/A-30 or any successor provision, shall be equal to the Eliminated Amount, if
any), shall be treated as Eliminated Payments. In the event that the Executive
fails to deliver an Executive Response on or before the required date, the
Company’s initial determination shall be final and the Contingent Compensation
Payments that shall be treated as Eliminated Payments shall be determined by the
Company in its absolute discretion. If the Executive states in the Executive
Response that he or she agrees with the Company’s determination, the Company
shall make the Potential Payments to the Executive within three business days
following delivery to the Company of the Executive Response (except for any
Potential Payments which are not due to be made until after such date, which
Potential Payments shall be made on the date on which they are due). If the
Executive states in the Executive Response that he or she disagrees with the
Company’s determination, then, for a period of 60 days following delivery of the
Executive Response, the Executive and the Company shall use good faith efforts
to resolve such dispute. If such dispute is not resolved within such 60-day
period, such dispute shall be settled exclusively by arbitration in Boston,
Massachusetts, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator’s award in
any court having jurisdiction. The Company shall, within three business days
following delivery to the Company of the Executive Response, make to the
Executive those Potential Payments as to which there is no dispute between the
Company and the Executive regarding whether they should be made (except for any
such Potential Payments which are not due to be made until after such date,
which Potential Payments shall be made on the date on which they are due). The
balance of the Potential Payments shall be made within three business days
following the resolution of such dispute. Subject to the limitations contained
in Sections 2.2(a) and (b) hereof, the amount of any payments to be made to the
Executive following the resolution of such dispute shall be increased by amount
of the accrued interest thereon computed at the prime rate announced from time
to time by Boston Communications Group, Inc.’s primary bank,, compounded monthly
from the date that such payments originally were due.

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  10.15   Mitigation.

 

The Executive shall not be required to mitigate the amount of any payment or
benefits provided for in this Section 2 by seeking other employment or
otherwise. Further, the amount of any payment or benefits provided for in this
Section 2 shall not be reduced by any compensation earned by the Executive as a
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company, or
otherwise.

 

  10.16   Other Payments.

 

This Agreement does not supercede or otherwise impact any other current
obligations of the Company to the Executive. Any amounts payable hereunder shall
not be offset by any amounts due to the Company from the Executive.

 

  11 Other Employment Termination.

 

If the Executive’s employment terminates for any reason other than as described
in Section 2, the Executive shall only receive any compensation owed to him as
of his termination date and any other post-termination benefits which the
Executive is eligible to receive under any plan or program of the Company.

 

  12 Successors.

 

  12.1 Successor to Company.

 

Company shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company expressly to assume and agree to perform this Agreement
to the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, “Company” shall mean the
Company as defined above and any successor to its business or assets as
aforesaid which assumes and agrees to perform this Agreement, by operation of
law or otherwise.

 

  12.2 Successor to Executive.

 

This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees. If the Executive should
die while any amount would still be payable to the Executive or his or her
family hereunder if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive’s estate.

 

  13 Notices. All notices, instructions and other communications given hereunder
or in connection herewith shall be in writing. Any such notice, instruction or
communication shall be sent either (i) by registered or certified mail, return
receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide
overnight courier service, in each case addressed to the Company, at 55
Middlesex Turnpike, Bedford, MA 01730, ATTN: President, and to the Executive at
the Executive’s address indicated on the signature page of this Agreement (or to
such other address as either the Company or the Executive may have furnished to
the other in writing in accordance herewith). Any such notice, instruction or
communication shall be deemed to have been delivered five business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service. Either party may give any notice, instruction or
other communication hereunder using any other means, but no such notice,
instruction or other communication shall be deemed to have been duly delivered
unless and until it actually is received by the party for whom it is intended.

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  14 Miscellaneous.

 

  14.1 Employment by Subsidiary. For purposes of this Agreement, the Executive’s
employment with the Company shall not be deemed to have terminated solely as a
result of the Executive continuing to be employed by a wholly-owned subsidiary
of the Company.

 

  14.2 Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

 

  14.3 Governing Law. The validity, interpretation, construction and performance
of this Agreement shall be governed by the internal laws of the State of
Massachusetts, without regard to conflicts of law principles.

 

  14.4 Waiver of Right to Jury Trial. Both the Company and the Executive
expressly waive any right that any party either has or may have to a jury trial
of any dispute arising out of or in any way related to the matters covered by
this Agreement.

 

  14.5 Waivers. No waiver by the Executive at any time of any breach of, or
compliance with, any provision of this Agreement to be performed by the Company
shall be deemed a waiver of that or any other provision at any subsequent time.

 

  14.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but both of which together shall
constitute one and the same instrument.

 

  14.7 Tax Withholding. Any payments provided for hereunder shall be paid net of
any applicable tax withholding required under federal, state or local law.

 

  14.8 Entire Agreement; Employment Agreement. This Agreement sets forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto in
respect of the subject matter contained herein; and any prior agreement of the
parties hereto in respect of the subject matter contained herein is hereby
terminated and cancelled.

 

  14.9 Not an Employment Contract. The Executive acknowledges that this
Agreement does not constitute a contract of employment or impose on the Company
any obligation to retain the Executive as an employee and that this Agreement
does not prevent the Executive from terminating employment at any time. If the
Executive’s employment with the Company terminates for any reason and
subsequently a Change in Control shall occur, the Executive shall not be
entitled to any benefits hereunder except as otherwise provided pursuant to
Section 2.

 

  14.10   Amendments. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.

 

  14.11   Executive’s Acknowledgements. The Executive acknowledges that he or
she: (a) has read this Agreement; (b) has been represented in the preparation,
negotiation and execution of this Agreement by legal counsel of the Executive’s
own choice or has voluntarily declined to seek such counsel; and (c) understands
the terms and consequences of this Agreement.

 

  14.12   Company Acknowledgements. The Company acknowledges that it has
received all necessary consents, approvals and votes, including from the Board
and holders of the Company’s Preferred Stock, to permit the Company to enter
into this Agreement and be bound hereby.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first set forth above.

 

BOSTON COMMUNICATIONS GROUP, INC.

By:

 

/s/ Karen Walker

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Karen A. Walker

    Vice president, Finance and Administration and Chief Financial Officer

EMPLOYEE:

By:

 

/s/ Paul J. Tobin

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Paul J. Tobin

   

Chairman