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EMPLOYMENT AGREEMENT
 
AGREEMENT, made and entered into as of the 24th day of August, 2008, by and
between All American Pet Company Inc., a Maryland corporation (together with its
successors and assigns permitted under this Agreement, the “Company”), and Barry
Schwartz (the “Executive”).
 
W I T N E S S E T H
 
WHEREAS, the Executive is currently serving as the Chairman of the Board of
Directors and Chief Executive Officer of the Company;
 
WHEREAS, the Company and the Executive enter into this employment agreement
dated August 24, 2008 (the “Employment Agreement”) under which the Term of
Employment (as defined under this Employment Agreement) expires on January 31,
2014;
 
WHEREAS, the Company desires to continue the employment of the Executive as its
Chairman and Chief Executive Officer embodying the terms of such continued
employment (this “Agreement”);
 
WHEREAS, the Executive desires to enter into this Agreement and to accept such
continued employment, subject to the terms and provisions of this Agreement;
 
WHEREAS, the Company and the Executive desire to formalize the terms of
employment by which  Executive has been serving the company  so that the Term of
Employment will now be formalized and expire on January 31, 2013
 
WHEREAS, the Company desires to grant the Executive an award of
performance-based restricted stock that will serve as incentive, retention and
retirement compensation;
 
WHEREAS, the Company and the Executive desire to set the terms for a formal
Employment Agreement to provide that the terms and conditions fully comply with
the requirements of Internal Revenue Code Section 409A and the regulations
promulgated there under;
 
WHEREAS, the Company and the Executive desire to amend the terms by which
Executive has been working  to make other miscellaneous and technical amendments
to the understanding by which the Executive has been working; and
 
WHEREAS, the Company and the Executive desire to amend and restate all prior
understanding regarding the terms of employment are restated  in its entirety
with this Agreement;
 
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
mutually acknowledged, the Company and the Executive (individually a “Party” and
together the “Parties”) agree as follows:
 

 
1.
Definitions.

 
(a) “Accelerated Equity Award Gains” shall mean the sum of (x) the Accelerated
Option and SAR Gains and (y) the Accelerated Share Award Gains.
 
(b) “Accelerated Options” shall mean those unvested stock options that become
vested in accordance with Sections 1l(d), 1l(e) or 1l(g).
 
(c) “Accelerated Option and SAR Gains” shall mean:
 

 
(1)
in the case of any Accelerated Option, or any Accelerated SAR that is settled in
shares of the Company’s common stock, the product of:

 

 
(A)
the number of shares of the Company’s common stock acquired by the Executive
upon exercise of any Accelerated Option or Accelerated SAR, multiplied by

 

 
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(B)
the difference between (x) the fair market value per share of the Company’s
common stock underlying such Accelerated Option or Accelerated SAR as of the
date on which the Executive exercised the Accelerated Option or Accelerated SAR
less (y) the exercise price or grant price (as equitably adjusted) of such
Accelerated Option or Accelerated SAR; or

 

 
(2)
in the case of any Accelerated SAR that is settled in cash or in property, other
than shares of the Company’s common stock, the amount of cash and fair market
value of any property paid or transferred to the Executive with respect to the
Accelerated SAR.

 
(d) “Accelerated Share Award Gains” shall mean the aggregate value of the
Accelerated Shares based on the closing price the Company’s common stock value
determined on whichever of the following dates produces the greatest value:
 

 
(1)
the Termination Date;

 

 
(2)
the date on which the Executive breaches Sections 14(a) or 14(b) below; or

 

 
(3)
the date on which the Executive transfers or otherwise disposes of the
Accelerated Shares.

 
(e) “Accelerated SARs” shall mean those unvested stock appreciation rights that
become vested in accordance with Sections 1l(d), 1l(e), or 11(g),
 
(f) “Accelerated Shares” shall mean those shares of the Company’s common stock
granted by the Company to the Executive as compensation for services that would
have been forfeited in the event that the Executive’s employment with the
Company had been terminated by the Company for Cause in accordance with
Section 11(c) below.
 
(g) “Base Salary” shall mean the Executive’s base salary as determined in
accordance with Section 4 below.
 
(h) “Board” shall mean the board of directors of the Company.
 
(i) “Bonus Opportunity” shall mean the Executive’s Threshold Bonus opportunity,
Target Bonus opportunity and Maximum Bonus opportunity as described in Section 5
below.
 
(j) “Cause” shall mean:
 

 
(1)
a conviction of the Executive, or a plea of nolo contendere, to a felony
involving moral turpitude; or

 

 
(2)
willful misconduct or gross negligence by the Executive resulting, in either
case, in material economic harm to the Company; or

 

 
(3)
a willful continued failure by the Executive to carry out the reasonable and
lawful directions of the Board; or

 

 
(4)
fraud, embezzlement, theft or dishonesty of a material nature by the Executive
against the Company or any Subsidiary or a willful material violation by the
Executive of a policy or procedure of the Company, resulting, in any case, in
material economic harm to the Company; or

 

 
(5)
a willful material breach by the Executive of this Agreement.

 
An act or failure to act shall not be “willful” if (i) done by the Executive in
good faith or (ii) the Executive reasonably believed that such action or
inaction was in the best interests of the Company.
 
(k) “Change in Control” shall mean:
 

 
(1)
the acquisition by any person, entity or “group” (as defined in Section 13(d) of
the Exchange Act) (other than by (i) any subsidiary or affiliate of the Company,
(ii) any entity owned, directly or indirectly, 50% or more by the Company,
(iii) any employee benefit plan of any such entity, and/or any

 

 
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entity for their benefit), through one transaction or a series of related
transactions of 50% or more of the combined voting power of the then outstanding
voting securities of the Company; or

 

 
(2)
the liquidation or dissolution of the Company (other than a dissolution
occurring upon a merger or consolidation thereof); or

 

 
(3)
the sale, transfer or other disposition of all or substantially all of the
assets of the Company through one transaction or a series of related
transactions to one or more persons or entities that are not, immediately prior
to such sale, transfer or other disposition, affiliates of the Company.

 
(l) “COBRA” shall mean the federal law with respect to continuation of health
coverage created under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended from time to time.
 
(m) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.
 
(n) “Competitive Activity” shall mean an activity in which the Executive engages
directly or indirectly (whether as a principal, agent, partner, employee,
investor, owner, consultant, board member or otherwise) that is in material
direct competition with the Company or any of its Subsidiaries in any of the
States within the United States, or countries within the world, in which the
Company or any of its Subsidiaries conducts business with respect to a business
in which the Company or any of its Subsidiaries engaged during the Term of
Employment; provided, however, that an ownership interest of 4.9% or less in any
publicly held company shall not constitute a Competitive Activity; and further
provided, however, that the Executive may be employed by or otherwise associated
with a business or entity of which a subsidiary, division, segment, unit, etc.
is in material direct competition with the Company or any Subsidiary but as to
which such subsidiary, division, segment, unit, etc. the Executive has no direct
or indirect responsibilities or involvement so long as the Executive does not
breach the covenant of confidentiality contained in Section 13 below.
 
(o) “Disability” shall mean the Executive’s inability to substantially perform
his essential duties and responsibilities under this Agreement, with or without
reasonable accommodation, for a period of (i) 6 consecutive months or (ii) 180
days in any 12-month period, as determined by a licensed physician mutually
selected by the Company and the Executive. If the Parties cannot so agree on a
licensed physician, each Party shall select a licensed physician and the two
licensed physicians shall select a third licensed physician who shall make such
determination for this purpose.
 
(p) “Effective Date” shall mean August 24, 2008.
 
(q) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended
from time to time.
 
(r) (i) the Executive, (ii) any spouse, parent, sibling or descendant of the
Executive, and (iii) any spouse or descendant of any parent, sibling or
descendent of the Executive.
 
(s) “Good Reason” shall mean, without the Executive’s prior written consent, the
occurrence of any of the following events or actions within the 90-day period
preceding a termination of employment by the Executive:
 

 
(1)
a reduction of the Executive’s Base Salary or Bonus Opportunity (i.e.—not a
reduction of any actual bonus amount (if any) paid from year to year); or

 

 
(2)
an actual relocation of the Executive’s principal office that is more than 25
miles from Beverly Hills; or

 

 
(3)
a diminution of the Executive’s title, authority, duties or responsibilities, or
the assignment to the Executive of titles, authority, duties or responsibilities
that are materially inconsistent with his titles, authority, duties and/or
responsibilities under Section 3 below, other than an isolated, insubstantial
and inadvertent action not taken in bad faith and which is promptly remedied; or

 

 
(4)
a failure to re-elect the Executive as a member of the Board; or

 

 
(5)
a failure of the Company to obtain the assumption in writing of its obligations
under this Agreement by any successor to all or substantially all of the assets
of the Company within 15 days after a merger, consolidation, sale or similar
transaction; or

 

 
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(6)
a material breach by the Company of this Agreement,

 
(t) “LTIC” shall mean long-term incentive compensation.
 
(u) “Maximum Bonus” shall mean the maximum annual incentive award opportunity
described in Section 5 below.
 
(v) “Noncompetition Period” shall mean the period commencing on the Effective
Date and ending on (i) if the Executive’s employment is terminated in accordance
with Section 11(b), 11(c), 11(d), 11(e), 11(f) or 11(g) below during the Term of
Employment, then the 2nd anniversary of the Termination Date, (ii) if the
Executive’s employment is terminated on account of the  
Executive’s death in accordance with Section 11(a), then the date of the
Executive’s death, or (iii) if the Term of Employment ends and the Executive’s
employment has not been terminated in accordance with Section 11 below, then the
5th anniversary of the Effective Date.
 
(w) “Nonsolicitation Period” shall mean the period commencing on the Effective
Date and ending on (i) if the Executive’s employment is terminated in accordance
with Section 1l(b), 1l(c), 1l(d), 1l(e), 1l(f) or 1l(g) below during the Term of
Employment, then the 2nd anniversary of the Termination Date, (ii) if the
Executive’s employment is terminated on account of the Executive’s death in
accordance with Section 11(a), then the date of the Executive’s death, or
(iii) if the Term of Employment ends and the Executive’s employment has not been
terminated in accordance with Section 11 below, then the anniversary of the
Effective Date.
 
(x) “Subsidiary” shall mean a corporation of which the Company owns more than
50% of the Voting Stock or any other business entity in which the Company
directly or indirectly has an ownership interest of more than 50%.
 
(y) “Target Bonus” shall mean the target annual incentive award opportunity
described in Section 5 below.
 
(z) “Threshold Bonus” shall mean the threshold annual incentive award
opportunity described in Section 5 below.
 
(aa) “Term of Employment” shall mean the period specified in Section 2 below.
 
(bb) “Termination Date” shall mean the date that the Executive’s employment is
terminated (either by death, by the Company or by the Executive) in accordance
with Section 11 below.
 
(cc) “Voting Stock” shall mean capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
 

 
2.
Term of Employment.

 
The Company hereby employs the Executive, and the Executive hereby accepts such
employment, for the period commencing on the Effective Date and ending on the
earlier of (i) 11:59 PM EST on January 31, 2014or (ii) the Termination Date. The
Company and the Executive shall both notify the other Party in writing on or
about the 4th anniversary of the Effective Date that the Term of Employment will
end in 1 year.
 

 
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3.
Position, Duties and Responsibilities; Reporting.

 
(a) As of the Effective Date and continuing for the remainder of the Term of
Employment, the Executive shall be employed as the Chairman and Chief Executive
Officer of the Company and shall be responsible for the operations and other
general management of the affairs of the Company. The Executive shall serve the
Company faithfully, conscientiously and to the best of the Executive’s ability
and shall promote the interests and reputation of the Company. Unless prevented
by sickness or Disability, the Executive shall devote a majority of the
Executive’s time, attention, knowledge, energy and skills, during normal working
hours, and at such other times as the Executive’s duties may reasonably require,
to the duties of the Executive’s employment. The Executive, in carrying out his
duties under this Agreement, shall report solely and directly to the Board of
Directors. Provided that the following activities do not materially interfere
with the Executive’s duties and responsibilities as Chairman and Chief Executive
Officer of the Company, the Executive may (i) engage in charitable and community
affairs, so long as such activities are consistent with his duties and
responsibilities under this Agreement, (ii) manage his personal investments, and
(iii) serve on the boards of directors of other companies (but not more than 3
public companies without the Board’s prior written consent).
 
(b) It is the intention of the Parties that the Executive shall serve as a
member of the Board at all times during the Term of Employment.
 
( c) The company will within one year of the date of this agreement shall
provide D & O insurance to cover all senior officers and directors.
 

 
4.
Base Salary.

 
During the Term of Employment, the Executive shall be paid an annualized Base
Salary of not less than $150,000. The Base Salary shall be payable in accordance
with the regular payroll practices of the Company. The Base Salary shall be
increased by a minimum of eight percent (8%) and reviewed no less frequently
than annually for purposes of increase in the discretion of the Board; provided,
however, that the Base Salary, if increased, shall never be decreased from such
increased amount unless the Executive provides his prior written consent to such
decrease.
 

 
5.
Annual Incentive Compensation Programs.

 
During the Term of Employment, the Executive shall participate in the Company’s
annual incentive compensation plan, program and/or arrangements applicable to
senior-level executives as established and modified from time to time by the
Board of Directors in its sole discretion. During the Term of Employment, the
Executive shall have a Threshold Bonus opportunity under such plan or program
equal to 60% of his current Base Salary, a Target Bonus opportunity under such
plan or program equal to 100% of his current Base Salary, and a Maximum Bonus
under such plan or program equal to 180% of his current Base Salary, in each
case based on satisfaction of performance criteria to be established by the
Compensation Committee of the Board within the first 3 months of each fiscal
year that begins during the Term of Employment. Payment of annual incentive
compensation awards shall be made in the same manner and at the same time that
other senior-level executives receive their annual incentive compensation
awards.
 

 
6.
Long-Term Incentive Compensation Programs.

 
(a) The Company shall grant at the signing of this agreement to the Executive
2,375,000 performance-based restricted shares of the Company’s common stock and
warrants that entitle the holder to purchase 2,500,000 shares of common stock at
a price of $0.17 per share for a period of ten (10) years from the date of the
options (the “Special Performance-Based Restricted Stock Grant”). The Parties
agree that all compensation attributable to the Special Performance-Based
Restricted Stock Grant shall be tax deductible under Code Section 162(m).
Subject to Section 11 below, the
 

 
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Special Performance-Based Restricted Stock Grant shall vest 100% on the
Executive’s 65th birthday, provided that he is still an employee of the Company
on that date. The Special Performance-Based Restricted Stock Grant shall be
subject to other terms and conditions as set forth by the Compensation Committee
of the Board in a Special Performance-Based Restricted Stock Award Agreement. If
the Company cannot grant all 2,375,000 shares due to the unavailability of such
shares under the Company’s shareholder-approved equity compensation plans, then
the Company shall grant the remaining un-granted shares under this Section 6(a)
within 30 days of the date that the Company’s shareholders approve either (i) a
new equity compensation plan or (ii) an amendment to the Company’s existing
equity compensation plan that increases the number of available shares under
such plan so that all of the remaining un-granted shares may be granted.
 
(b) In addition to the Special Performance-Based Restricted Stock Grant, during
the Term of Employment, the Executive shall be eligible to participate in the
Company’s applicable long-term incentive compensation plan as maybe established
and modified from time to time by the Board in its sole discretion commensurate
with his titles and position, and shall be eligible to receive awards under that
plan in such form and amounts, and subject to such conditions, as the
Compensation Committee shall determine each year.
 

 
7.
Employee Benefit Programs.

 
(a) During the Term of Employment, the Executive shall be entitled to
participate in all employee welfare and pension benefit plans, programs and/or
arrangements applicable to the senior-level executives.
 
(b) During the Term of Employment, the Company shall provide and/or pay for a
life insurance policy on the Executive’s life with a $2 million death benefit.
The Executive shall designate in his sole discretion the beneficiary under such
policy. If the life insurance cannot be purchased at standard rates, then the
Company shall provide and/or pay for that amount of insurance that can be
purchased for premiums equal to the coverage specified above at standard rates.

  (c) During the Term of Employment, the Executive shall be entitled to be
reimbursed for (1) car in an amount of $1,000 per month and local travel
expenses including insurance, maintenance and fuel expenses, (2)mobile telephone
and (3) miscellaneous expenses.
 

 
8.
Reimbursement of Business Expenses.

 
During the Term of Employment, the Executive is authorized to incur reasonable
business expenses in carrying out his duties and responsibilities under this
Agreement, and the Company shall promptly reimburse him for all such reasonable
business expenses incurred in connection with carrying out the business of the
Company, subject to documentation in accordance with the Company’s policy. The
Company shall pay directly or reimburse the Executive for all attorneys’ fees,
disbursements and costs incurred by the Executive in connection with the
negotiation, preparation and execution of this Agreement, up to a maximum of
$7,500, subject to proper documentation.
 
 

 
9.
Perquisites.

 
During the Term of Employment, the Executive shall be entitled to participate in
the Company’s executive perquisite and fringe benefit programs applicable to the
Company’s senior-level executives in accordance with the terms and conditions of
such arrangements as are in effect from time to time. Notwithstanding anything
contained in this Agreement to the contrary, the Executive shall be entitled to
commercial first-class air travel and accommodations when traveling on Company
business.
 

 
10.
Vacation.

 
The Executive shall be entitled to at least 30 paid vacation days per calendar
year in accordance with the Company’s vacation policy in effect from time to
time,  Executive may at his sole option carry 100% of all unused vacation into
the next year or choose to be paid for the time at his normal rate of pay. If
payment is chosen, it will occur within January of the year following the year
in which it was earned.

 
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11.
Termination of Employment.

 
(a) Termination of Employment Due to Death. In the event of the Executive’s
death during the Term of Employment, the Term of Employment shall end as of the
date of the Executive’s death and his estate and/or beneficiaries, as the case
may be, shall be entitled to the following:
 

 
(1)
Base Salary earned but not paid prior to the date of the Executive’s death,
payable within 15 days of the Termination Date;

 

 
(2)
all annual incentive compensation awards with respect to any year prior to the
year in which the date of the Executive’s death occurs that have been earned but
not paid, payable (i) if the amount of the award had been determined as of or
prior to the Termination Date, then within 15 days of the Termination Date or
(ii) if the amount of the award had not been determined as of or prior to the
Termination Date, then at such time as such awards would have been paid in the
absence of such termination of employment;

 

 
(3)
a pro rata Target Bonus, payable within 15 days of the Termination Date;

 

 
(4)
all restricted stock, restricted stock units, performance shares, performance
units, stock options, stock appreciation rights and all other equity-based LTIC
awards, including but not limited to the Special Performance-Based Restricted
Stock Grant, shall immediately vest as of the Termination Date and be paid or
distributed, as the case may be, within 15 days of the Termination Date;

 

 
(5)
all performance-based compensation payable in cash and based on a performance
metric other than stock price shall be paid on a pro rata basis based on the
portion of the performance period completed as of the

 
 

 
Termination Date and assuming, for these purposes, that all target goals had
been achieved as of the Termination Date, payable within 15 days of the
Termination Date;

 

 
(6)
all stock options held by the Executive as of the date of the Executive’s death
and that were granted prior to the Effective Date shall remain exercisable until
such times as they terminate in accordance with the terms of the applicable
stock option agreements;

 

 
(7)
all stock options held by the Executive as of the date of the Executive’s death
and that were granted on or after the Effective Date shall remain exercisable
until the earlier of:

 

 
(A)
the stock option’s originally scheduled expiration date, or

 

 
(B)
the end of the 2-year period immediately following the Termination Date;

 

 
(8)
all premiums on health insurance for his spouse and his dependents shall be
fully paid by the Company for as long as they are eligible for COBRA coverage
under the Company’s health plan;

 

 
(9)
any amounts earned, accrued or owing to the Executive but not yet paid under
Section 7, 8, 9 or 10 above; and

 

 
(10)
such other or additional benefits, if any, as may be provided under applicable
plans, programs and/or arrangements of the Company.

 
(b) Termination of Employment Due to Disability. If the Executive’s employment
is terminated due to Disability during the Term of Employment, either by the
Company or by the Executive, the Term of Employment shall end as of the date of
the termination of the Executive’s employment and the Executive shall be
entitled to the following:
 

 
(1)
Base Salary earned but not paid prior to the Termination Date, payable within 15
days of the Termination Date;

 

 
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(2)
all annual incentive compensation awards with respect to any year prior to the
year in which the Termination Date occurs that have been earned but not paid,
payable (i) if the amount of the award had been determined as of or prior to the
Termination Date, then within 15 days of the Termination Date or (ii) if the
amount of the award had not been determined as of or prior to the Termination
Date, then at such time as such awards would have been paid in the absence of
such termination of employment;

 
 

 
(3)
a pro rata Target Bonus, payable within 15 days of the Termination Date;

 

 
(4)
all restricted stock, restricted stock units, performance shares, performance
units, stock options, stock appreciation rights and all other equity-based LTIC
awards, including but not limited to the Special Performance-Based Restricted
Stock Grant, shall immediately vest as of the Termination Date and be paid or
distributed, as the case may be, within 15 days of the Termination Date;

 

 
(5)
all performance-based compensation payable in cash and based on a performance
metric other than stock price shall be paid on a pro rata basis based on the
portion of the performance period completed as of the Termination Date and
assuming, for these purposes, that all target goals had been achieved as of the
Termination Date, payable within 15 days of the Termination Date;

 

 
(6)
all stock options held by the Executive as of the Termination Date and that were
granted prior to the Effective Date shall remain exercisable until such times as
they terminate in accordance with the terms of the applicable stock option
agreements;

 

 
(7)
all stock options held by the Executive as of the Termination Date and that were
granted on or after the Effective Date shall remain exercisable until the
earlier of:

 

 
(A)
the stock option’s originally scheduled expiration date, or

   

 
(B)
the end of the 1-year period immediately following the Termination Date;

 

 
(8)
all premiums on health insurance for himself, his spouse and his dependents
shall be fully paid by the Company for as long as they are eligible for COBRA
coverage under the Company’s health plan;

 

 
(9)
any amounts earned, accrued or owing to the Executive but not yet paid under
Section 7, 8, 9 or 10 above; and

 

 
(10)
such other or additional benefits, if any, as may be provided under applicable
plans, programs and/or arrangements of the Company.

 
In no event shall a termination of the Executive’s employment for Disability
occur unless the Party terminating the Executive’s employment gives written
notice to the other Party in accordance with Section 26 below.
 
(c) Termination of Employment by the Company for Cause. If the Company
terminates the Executive’s employment for Cause during the Term of Employment,
the Term of Employment shall end as of the date of the termination of the
Executive’s employment for Cause and the Executive shall be entitled to the
following:
 

 
(1)
Base Salary earned but not paid prior to the Termination Date;

 

 
(2)
any amounts earned, accrued or owing to the Executive but not yet paid under
Section 7, 8, 9 or 10 above; and

 

 
(3)
such other or additional benefits, if any, as are provided under applicable
plans, programs and/or arrangements of the Company.

 

 
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In no event shall a termination of the Executive’s employment for Cause occur
unless the Company gives written notice to the Executive in accordance with
Section 26 below stating with specificity the events or actions that constitute
Cause and providing the Executive with an opportunity to cure (if curable)
within a reasonable period of time. No termination of the Executive’s employment
for Cause shall be permitted unless the Termination Date occurs during the
120-day period immediately following the date that the events or actions
constituting Cause first become known to the Board. Cause shall in no event be
deemed to exist except upon a finding reflected in a resolution of the Board,
whose finding shall not be binding upon any decision-maker ruling on this
Agreement, at a meeting to which the Executive (and the Executive’s counsel)
shall be invited upon proper notice. If the Executive’s employment is terminated
by the Company under this Section 1l(c) based on Cause pursuant to Section
l(j)(l) above and the Executive’s conviction is overturned on appeal, then the
Executive’s employment shall be deemed to have been terminated by the Company
without Cause in accordance with Section 11(d) below.
 
(d) Termination of Employment by the Company Without Cause. If the Executive’s
employment is terminated by the Company without Cause, other than due to death
or Disability, the Term of Employment shall end as of the date of the
termination of the Executive’s employment without Cause and the Executive shall
be entitled to the following:
 

 
(1)
Base Salary earned but not paid prior to the Termination Date, payable within 15
days of the Termination Date;

 

 
(2)
all annual incentive compensation awards with respect to any year prior to the
year in which the Termination Date occurs that have been earned but not paid,
payable (i) if the amount of the award had been determined as of or prior to the
Termination Date, then within 15 days of the Termination Date or (ii) if the
amount of the award had not been determined as of or prior to the Termination
Date, then at such time as such awards would have been paid in the absence of
such termination of employment;

 
 

 
(3)
100% of the annual incentive compensation bonus described in Section 5 above,
based on the achievement of the performance goals established under such
arrangement, with respect to the year in which the Termination Date occurs,
payable when such annual incentive compensation bonuses are paid to other senior
executives of the Company;

 

 
(4)
a lump sum cash amount equal to 100% of the sum of (i) the greater of (x) the
Base Salary in effect on the Termination Date or (y) the Base Salary immediately
prior to any reduction that would constitute Good Reason, plus (ii) the greater
of (a) the Target Bonus in effect on the Termination Date or (b) the Target
Bonus immediately prior to any reduction that would constitute Good Reason,
payable within 15 days of the Termination Date;

 

 
(5)
all restricted stock, restricted stock units, stock options, stock appreciation
rights and all other equity-based LTIC awards shall immediately vest as of the
Termination Date and be paid or distributed, as the case may be, within 15 days
of the Termination Date, other than performance shares, performance units, and
other performance-based equity awards which shall vest on the date that the
performance goals established under such performance-based equity compensation
arrangement are achieved;

 

 
(6)
all performance-based compensation payable in cash and based on a performance
metric other than stock price shall be paid on a pro rata basis based on the
achievement of the performance goals established under such arrangement, payable
when such performance-based compensation is paid to other senior executives of
the Company;

 

 
(7)
all stock options held by the Executive as of the Termination Date and that were
granted prior to the Effective Date shall remain exercisable until such times as
they terminate in accordance with the terms of the applicable stock option
agreements;

 

 
(8)
all stock options held by the Executive as of the Termination Date and that were
granted on or after the Effective Date shall remain exercisable until the
earlier of:

 

 
(A)
the stock option’s originally scheduled expiration date, or

 

 
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(B)
the end of the 1-year period immediately following the Termination Date;

 

 
(9)
all premiums on health insurance for himself, his spouse and his dependents
shall be fully paid by the Company for as long as they are eligible for COBRA
coverage under the Company’s health plan;

 

 
(10)
any amounts earned, accrued or owing to the Executive but not yet paid under
Section 7, 8, 9 or 10 above; and

 

 
(11)
 
 
(12)
such other or additional benefits, if any, as are provided under applicable
plans, programs and/or arrangements of the Company;
 
a severance payment of $2,00,000 payable in good funds within fifteen (15) days
of termination.

 
In no event shall a termination of the Executive’s employment without Cause
occur unless the Company gives written notice to the Executive in accordance
with Section 26 below.
 
(e) Termination of Employment by the Executive for Good Reason. The Executive
may terminate his employment for Good Reason, provided that the Termination Date
occurs during the 2-year period immediately following the date that the events
or actions constituting Good Reason first become known to the Executive. Upon a
termination by the Executive of his employment for Good Reason, the Term of
Employment shall end as of the date of the termination of the Executive’s
employment for Good Reason and the Executive shall be entitled to the same
payments and benefits as provided in Section 11(d) above. In no event shall a
termination of the Executive’s employment for Good Reason occur unless the
Executive gives written notice to the Company in accordance with Section 26
below stating with specificity the events or actions that constitute Good Reason
(a “Good Reason Notice”). In addition, the Executive shall provide the Good
Reason Notice to the Company during the 90-day period immediately following the
date that the events or actions constituting Good Reason first become known to
the Executive. The Executive shall provide the Company with an opportunity to
cure (if curable) the events or actions constituting Good Reason within a
reasonable period of time, but at least 30 days from the date the Company
receives the Good Reason Notice.
 
(f) Voluntary Termination of Employment by the Executive Without Good Reason. If
the Executive voluntarily terminates his employment without Good Reason, other
than a termination of employment due to death or Disability, the Term of
Employment shall end as of the date of the termination of the Executive’s
employment without Good Reason and the Executive shall be entitled to the same
payments and benefits as provided in Section 1l(c) above, provided that the
Executive shall be entitled to all annual incentive compensation awards with
respect to any year prior to the year in which the Termination Date occurs that
have been earned but not paid, payable at such time as such awards would have
been paid in the absence of such termination of employment. In no event shall a
voluntary termination of the Executive’s employment without Good Reason occur
unless the Executive gives written notice to the Company in accordance with
Section 26 below at least 30 days prior to the date of the actual date of the
termination of the Executive’s employment. A termination of the Executive’s
employment under this Section 1l(f) shall not be a breach of this Agreement.
 
(g) Termination of Employment in Connection with a Change in Control. If the
Executive’s employment is terminated by the Company without Cause or by the
Executive for Good Reason during (i) the 6-month period immediately preceding
the date of the Change in Control or (ii) the 2-year period immediately
following the date of the Change in Control, the Term of Employment shall end as
of the date of the termination of the Executive’s employment without Cause or
for Good Reason, as the case may be, and the Executive shall be entitled to the
following:
 

 
(1)
Base Salary earned but not paid prior to the Termination Date, payable within 15
days of the Termination Date;

 
 

 
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(2)
all annual incentive compensation awards with respect to any year prior to the
year in which the Termination Date occurs that have been earned but not paid,
payable (i) if the amount of the award had been determined as of or prior to the
Termination Date, then within 15 days of the Termination Date or (ii) if the
amount of the award had not been determined as of or prior to the Termination
Date, then at such time as such awards would have been paid in the absence of
such termination of employment;

 

 
(3)
a pro rata Target Bonus, payable within 15 days of the Termination Date;

 

 
(4)
a lump sum cash amount equal to 300% of the sum of (i) the greater of (x) the
Base Salary in effect on the Termination Date or (y) the Base Salary immediately
prior to any reduction that would constitute Good Reason, plus (ii) the greater
of (a) the Target Bonus in effect on the Termination Date or (b) the Target
Bonus immediately prior to any reduction that would constitute Good Reason,
payable within 15 days of the Termination Date;

 

 
(5)
all restricted stock, restricted stock units, performance shares, performance
units, stock options, stock appreciation rights and all other equity-based LTIC
awards, including but not limited to the Special Performance-Based Restricted
Stock Grant, shall immediately vest as of the Termination Date and be paid or
distributed, as the case may be, within 15 days of the Termination Date;

 

 
(6)
all performance-based compensation payable in cash and based on a performance
metric other than stock price shall be paid on a pro rata basis based on the
portion of the performance period completed as of the Termination Date and
assuming, for these purposes, that all target goals had been achieved as of the
Termination Date, payable within 15 days of the Termination Date;

 

 
(7)
all stock options held by the Executive as of the Termination Date and that were
granted prior to the Effective Date shall remain exercisable until such times as
they terminate in accordance with the terms of the applicable stock option
agreements;

 

 
(8)
all stock options held by the Executive as of the Termination Date and that were
granted on or after the Effective Date shall remain exercisable until the
earlier of:

 

 
(A)
the stock option’s originally scheduled expiration date, or

   

 
(B)
the end of the 1-year period immediately following the Termination Date;

 

 
(9)
all premiums on health insurance for himself, his spouse and his dependents
shall be fully paid by the Company for as long as they are eligible for COBRA
coverage under the Company’s health plan;

 

 
(10)
any amounts earned, accrued or owing to the Executive but not yet paid under
Section 7, 8, 9 or 10 above; and

 

 
(11)
such other or additional benefits, if any, as are provided under applicable
plans, programs and/or arrangements of the Company.

 
In no event shall a termination of the Executive’s employment without Cause in
connection with a Change in Control occur unless the Company gives written
notice to the Executive in accordance with Section 26 below.

 
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(h) Clawback of Certain Compensation and Benefits. If, after the termination of
the Executive’s employment with the Company for any reason other than by the
Company for Cause:
 

 
(1)
it is determined in good faith by the Board and in accordance with the due
process requirements of Section 11(c) that the Executive’s employment could have
been terminated by the Company for Cause under Section 1l(c) above, or

 

 
(2)
the Executive breaches Sections 14(a) or 14(b) below; then

 

 
(3)
in addition to any other remedy that may be available to the Company in law or
equity and/or pursuant to any other provisions of this Agreement, the
Executive’s employment shall be deemed to have been terminated for Cause
retroactively to the Termination Date and the Executive shall also be subject to
the following provisions:

 

 
(i)
the Executive shall be required to pay to the Company, immediately upon written
demand by the Board, all amounts paid to him by the Company, whether or not
pursuant to this Agreement, on or after the

 
 

 
Termination Date (including the pre-tax cost to the Company of any benefits
(other than those described in clause (iii) of this Section 11(h)(3)) provided
by the Company) that are in excess of the total amount that the Company would
have been required to pay (and the pre-tax cost of any benefits (other than
those described in clause (iii) of this Section 11(h)(3)) that the Company would
have been required to provide) to the Executive if the Executive’s employment
with the Company had been terminated by the Company for Cause in accordance with
Section 11(c) above;

 

 
(ii)
all vested and unvested stock options then held by the Executive shall
immediately expire; and

 

 
(iii)
the Executive shall be required to pay to the Company, immediately upon written
demand by the Board, an amount equal to all Accelerated Equity Award Gains that
the Executive has received.

 
Notwithstanding anything contained in this Agreement to the contrary, this
Section 11 (h) shall not apply if the Board knew or should have known as of or
prior to the Termination Date that the Executive’s employment could have been
terminated for Cause in accordance with Section 11(c) above.
 
(i) No Mitigation; No Offset. In the event of any termination of the Executive’s
employment under this Section 11, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this Agreement on account of any compensation attributable to
any subsequent employment that he may obtain except as specifically provided in
this Section 11. Notwithstanding anything contained in this Agreement to the
contrary, all compensation and benefits payable under this Section 11 shall be
reduced by any other compensation and benefits payable under any severance or
change-in-control plan, program, policy or arrangement of the Company in which
the Executive is a participant and under which he has actually and previously
received compensation and/or benefits.
 
(j) Return of Company Property. Following the Termination Date, the Executive or
his personal representative shall return all Company property in his possession,
including but not limited to all computer equipment (hardware and software),
telephones, facsimile machines, palm pilots and other communication devices,
credit cards, office keys, security access cards, badges, identification cards
and all copies (including drafts) of any documentation or information (however
stored) relating to the business of the Company, its customers and clients or
its prospective customers and clients (provided that the Executive may retain a
copy the addresses contained in his rolodex, palm pilot, PDA or similar device).
 
 

 
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(k) Resignation as an Officer and Director. On or before the Termination Date,
the Executive shall submit to the Company in writing his resignation as (i) an
officer of the Company and of all Subsidiaries and (ii) a member of the Board of
Directors and of the board of directors of all Subsidiaries.
 
(1) Nature of Payments. Any amounts due under this Section 11 are in the nature
of severance payments considered to be reasonable by the Company and are not in
the nature of a penalty.
 
(m) Waiver and Release. If the termination of the Executive’s employment is
subject to Section 11(d), 11(e), or 11(g), the Executive and the Company agree
that each Party shall execute a waiver and release substantially in the form
attached to this Agreement as Exhibit A, and the Executive’s rights to receive
any payments or benefits pursuant to Section 11(d)(3) through 11(d)(9) or
Section 11(g)(3) through 11(g)(9) above shall be subject to and conditioned upon
the Executive’s execution of such waiver and release.
 
(n) Cooperation. Following the Term of Employment, the Executive shall give his
assistance and cooperation willingly, upon reasonable advance notice with due
consideration for his other business or personal commitments, in any matter
relating to his position with the Company, or his expertise or experience as the
Company may reasonably request, including his attendance and truthful testimony
where deemed appropriate by the Company, with respect to any investigation or
the Company’s defense or prosecution of any existing or future claims or
litigations or other proceedings relating to matters in which he was involved or
potentially had knowledge by virtue of his employment with the Company. In no
event shall his cooperation materially interfere with his services for a
subsequent employer or other similar service recipient. To the extent permitted
by law, the Company agrees that (i) it will promptly reimburse the Executive for
his reasonable and documented expenses in connection with his rendering
assistance and/or cooperation under this Section 11(n) upon his presentation of
documentation for such expenses and (ii) the Executive will be reasonably
compensated for any continued material services as required under this
Section 11(n).
 

 
12.
Tax Matters.

 
(a) Withholding. The Company may withhold from any amounts payable under this
Agreement such federal, state and local taxes as may be required to be withheld
pursuant to any applicable law or regulation.
 
(b) Sections 280G/4999 Golden Parachute Tax. If during or after the Term of
Employment, the Executive becomes subject to the excise tax imposed by Code
Section 4999 (the “Parachute Excise Tax”), the Parties agree to the following:
 

 
(1)
Mandatory Reduction. If the aggregate of all “parachute payments” (as such term
is used under Code Section 280G) exceeds 300% of the “base amount” (as such term
is used under Code Section 280G) by less than $550,000, then the parachute
payment shall be reduced to 299.99% of such base amount.

 

 
(2)
Tax Gross-Up. If the aggregate of all parachute payments exceeds 300% of the
base amount by $550,000 or more, then the Company shall pay to the Executive a
tax gross-up payment so that after payment by or on behalf of the Executive of
all federal, state, and local excise, income, employment, Medicare and any other
taxes (including any related penalties and interest) resulting from the payment
of the parachute payments and the tax gross-up payments to the Executive by the
Company, the Executive retains on an after-tax basis an amount equal to the
amount that the Executive would have retained if he had not been subject to the
Parachute Excise Tax.

 

 
(3)
Computation of Excess Parachute Payment. The computation of the excess parachute
payment in accordance with Code Section 280G shall be done by a nationally
recognized and reputable independent accounting or valuation firm mutually
selected by the Executive and the Company, and if the Parties cannot so agree on
the selection of a firm, then each Party shall select a firm and the two
selected firms shall select a third firm that shall make the computations for
this purpose,

 

 
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(4)
Notification by Executive. The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of any tax gross-up payments. Such notification shall be
given as soon as practicable but no later than 10 business days after the
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:

 

 
a.
give the Company any information reasonably requested by the Company relating to
such claim,

 

 
b.
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

 

 
c.
cooperate with the Company in good faith in order effectively to contest such
claim, and

 

 
d.
permit the Company to participate in any proceedings relating to such claim;

 
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any excise tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 12(b), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any excise tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a gross-up payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
 

 
(5)
Refunds and Repayments. If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 12(b)(2) above, the Executive
becomes entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Company’s complying with the requirements of this
Section 12(b) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon

 

 
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after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 12(b)(2) above, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of gross-up payment required to be paid.

 
(c) Section 409A.
 

 
(1)
Full Compliance. It is the intent of the Parties that all compensation and
benefits payable or provided to the Executive (whether under this Agreement or
otherwise) shall fully comply with the requirements of Code Section 409A. The
Company agrees that it will not, without the Executive’s prior written consent,
take any action, or refrain from taking any action, that would result in the
imposition of tax, interest and/or penalties upon the Executive under Code
Section 409A, and that it will hold the Executive harmless if any action it
takes results in the imposition of such tax, interest and/or penalties.

 

 
(2)
Specified Employee. Notwithstanding anything contained in this Agreement to the
contrary, if the Executive is a “specified employee” (determined in accordance
with Code Section 409A and Treasury Regulation Section 1.409A-3(i)(2)) as of the
Termination Date, and if any payment, benefit or entitlement provided for in
this Agreement or otherwise both (i) constitutes a “deferral of compensation”
within the meaning of Code Section 409A (“Nonqualified Deferred Compensation”)
and (ii) cannot be paid or provided in a manner otherwise provided herein or
otherwise without subjecting the Executive to additional tax, interest and/or
penalties under Code Section 409A, then any such payment, benefit or entitlement
that is payable during the first 6 months following the Termination Date shall
be paid or provided to the Executive in a lump sum cash payment to be made on
the earlier of (x) the Executive’s death or (y) the first business day of the
seventh calendar month immediately following the month in which the Termination
Date occurs.

 

 
(3)
Change in Control. Notwithstanding anything contained in this Agreement to the
contrary, any payment or benefit that (i) qualifies as Nonqualified Deferred
Compensation and (ii) is paid or distributed due to a Change

 
 

 
in Control, whether pursuant to this Agreement or otherwise, shall only be paid
or distributed if such event that qualifies as a Change in Control under this
Agreement also qualifies as either a “change in the ownership or effective
control of a corporation” or a “change in the ownership of a substantial portion
of the assets of a corporation” in accordance with Treasury Regulation
1.409A-3(i)(5).

 

 
(4)
Expense Reimbursements. Notwithstanding anything contained in this Agreement to
the contrary, except to the extent any reimbursement, payment or entitlement
under Sections 7, 8, 9 or 10 above does not qualify as Nonqualified Deferred
Compensation, (i) the amount of expenses eligible for reimbursement or the
provision of any in-kind benefit (as defined in Section 409A) to the Executive
during any calendar year will not affect the amount of expenses eligible for
reimbursement or provided as in-kind benefits to the Executive in any other
calendar year, (ii) the reimbursements for expenses for which the Executive is
entitled shall be made on or before the last day of the calendar year following
the calendar year in which the applicable expense is incurred and (iii) the
right to payment or reimbursement or in-kind benefits may not be liquidated or
exchanged for any other benefit

 

 
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(5)
Reimbursement of Expenses in Connection with a Separation from Service.
Notwithstanding anything contained in this Agreement to the contrary, any
payment or benefit paid or provided under Section 11 above or otherwise paid or
provided due to a “separation from service” (as such term is described and used
in Code Section 409A and the Treasury Regulations promulgated there under) that
is exempt from Code Section 409A pursuant to Treasury Regulation
Section 1.409A-l(b)(9)(v) shall be paid or provided to the Executive only to the
extent the expenses are not incurred or the benefits are not provided beyond the
last day of the second taxable year of the Executive following the taxable year
of the Executive in which the separation from service occurs; provided, however
that the Company reimburses such expenses no later than the last day of the
third taxable year following the taxable year of the Executive in which the
separation from service occurs.

 

 
(6)
Involuntary Separation due to Good Reason. Notwithstanding anything contained in
this Agreement to the contrary, the Executive may only terminate his employment
for Good Reason in accordance with Section 11 (e) above only if such termination
of employment complies with Treasury Regulation Section 1.409A-1(n)(2). It is
the intent of the Parties that the definition of Good Reason and the
separation-from-service procedures specified in Section 11(e) fully comply with
Treasury Regulation Section 1.409A-1(n)(2).

 

 
(7)
Tax Gross-Ups. Notwithstanding anything contained in this Agreement to the
contrary, all tax gross-up payments, including but not limited to the tax
gross-up payment described in Section 12(b) above, shall be paid by the end of
the Executive’s taxable year immediately following the Executive’s taxable year
in which the Executive (or the Company on his behalf) remits the related taxes,
and which shall otherwise fully complies with Treasury Regulation
Section 1.409A-3(i)(l)(v).

 

 
(8)
Dispute Resolution Payments. Any dispute resolution payment (including related
reimbursable expenses, fees and other costs) that does not qualify as a “legal
settlement” in accordance with Treasury Regulation 1.409A-1(b)(11) shall be paid
by the Company to the Executive not later than the last day of the Executive’s
taxable year following the year in which the dispute is resolved.

 
(d) Section 83. It is the intent of the Parties that the Special
Performance-Based Restricted Stock Grant be taxed under Code Section 83. The
Executive may – but is not obligated to – make an election under Code
Section 83(b) within 30 days of the date of grant of the Special
Performance-Based Restricted Stock Grant.
 
(e) Section 162(m). It is the intent of the Parties that the Special
Performance-Based Restricted Stock Grant qualifies as “performance-based
compensation” (as such term is described in Code Section 162(m)(4) and Treasury
Regulation Section 1.162-27(e)).
 

 
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13.
Confidentiality: Assignment of Rights.

 
(a) During the Term of Employment and thereafter, the Executive shall not
disclose to anyone or make use of any trade secret or proprietary or
confidential information of the Company, including such trade secret or
proprietary or confidential information of any customer or other entity to which
the Company owes an obligation not to disclose such information, which he
acquires during the Term of Employment, including but not limited to records
kept in the ordinary course of business, except (i) as such disclosure or use
may be required or appropriate in connection with his work as an employee of the
Company, (ii) 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, (iii) as to such confidential information that becomes generally
known to the public or trade without his violation of this Section 12(a), or
(iv) to the Executive’s spouse, attorney and/or his personal tax and financial
advisors as reasonably necessary or appropriate to advance the Executive’s tax,
financial and other personal planning (each an “Exempt Person”),provided,
 however, that any disclosure or use of any trade secret or proprietary or
confidential information of the Company by an Exempt Person shall be deemed to
be a breach of this Section 13(a) by the Executive. For purposes of this
Agreement, confidential information includes all trade secrets and information
disclosed to the Executive or known by the Executive as a consequence of or
through the unique position of his employment with the Company (including
information conceived, originated, discovered or developed by the Executive and
any information acquired by the Company from others) prior to or after the
Effective Date, and not generally or publicly known, (other than as a result of
unauthorized disclosure by the Executive), with respect to the Company or the
Company’s business, and including proprietary or confidential information
received by the Company from third parties subject to an obligation on the
Company’s part to maintain the confidentiality of the information. If any person
or authority makes a demand on the Executive purporting to legally compel him to
divulge any confidential information, the Executive shall give notice of the
demand to the Company within a reasonable period of time so that the Company may
first assess whether to challenge the demand prior to the Executive’s divulging
of such confidential information. The Executive shall not divulge such
confidential information (unless compelled to do so by law or apparent legal
authority) until the Company either has concluded not to challenge the demand,
or has exhausted its challenge, including appeals, if any. Upon request by the
Company, the Executive shall deliver promptly to the Company upon termination of
his services for the Company, or at any time thereafter as the Company may
request, all memoranda, notes, records, reports, manuals, drawings, designs,
computer files in any media and other documents (and all copies thereof)
relating to the Company containing such confidential information and all
property of the Company or any other Company affiliate, which he may then
possess or have under his control.
 
(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
Employment are 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 receives 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 compensation 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.
 

 
14.
Noncompetition; Nonsolicitation.

 
(a) The Executive covenants and agrees that during the Noncompetition Period he
shall not at any time, without the prior written consent of the Company directly
or indirectly, engage in a Competitive Activity or call on, solicit or do
business with any customer or client of the Company or any Subsidiary with
respect to a Competitive Activity.

 
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(b) The Executive covenants and agrees that during the Nonsolicitation Period he
shall not at any time, directly or indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity, employ or
attempt to employ any employee of the Company or any Subsidiary (other than his
personal administrative assistant(s)) for the purpose of causing such employee
to terminate his or her employment with the Company or such Subsidiary.
 
(c) The Parties acknowledge that in the event of a breach or threatened breach
of Section 14(a) and/or Section 14(b) above, the Company shall not have an
adequate remedy at law. Accordingly, and notwithstanding anything contained in
this Agreement to the contrary, in the event of any breach or threatened breach
of Section 14(a) and/or Section 14(b) above, the Company shall be entitled to
seek such equitable and injunctive relief as may be available to restrain the
Executive and any business, firm, partnership, individual, corporation or entity
participating in the breach or threatened breach from the violation of the
provisions of Section 14(a) and/or Section 14(b) above. Nothing in this
Agreement shall be construed as prohibiting the Company from pursuing any other
remedies available at law or in equity for breach or threatened breach of
Section 14(a) and/or Section 14(b) above, including the recovery of damages.
 

 
15.
Indemnification.

 
(a) The Company agrees that if the Executive is made a party, or is threatened
to be made a party, to any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a “Proceeding”), by reason of the fact that he
is or was a director, officer or employee of the Company or is or was serving at
the request of the Company as a director, officer, member, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether or not the
basis of such Proceeding is the Executive’s alleged action in an official
capacity while serving as a director, officer, member, employee or agent, the
Executive shall be indemnified and held harmless by the Company to the fullest
extent legally permitted or authorized by the Company’s certificate of
incorporation or bylaws or resolutions of the Board and any applicable laws, or,
if greater, and not precluded by applicable laws, by the laws of the State of
California, against all cost, expense, liability and loss (including, without
limitation, attorney’s fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
the Executive in connection therewith, and such indemnification shall continue
as to the Executive even if he has ceased to be a director, member, employee or
agent of the Company or other entity and shall inure to the benefit of the
Executive’s heirs, executors and administrators. The Company shall advance to
the Executive all reasonable costs and expenses incurred by him in connection
with a Proceeding within 20 days after receipt by the Company of a written
request for such advance. Such request shall include an undertaking by the
Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses.
 
(b) Neither the failure of the Company (including its board of directors,
independent legal counsel or stockholders) to have made a determination prior to
the commencement of any proceeding concerning payment of amounts claimed by the
Executive under Section 15(a) above that indemnification of the Executive is
proper because he has met the applicable standard of conduct, nor a
determination by the Company (including its board of directors, independent
legal counsel or stockholders) that the Executive has not met such applicable
standard of conduct, shall create a presumption that the Executive has not met
the applicable standard of conduct.
 
(c) The Company agrees to continue and maintain a directors’ and officers’
liability insurance policy covering the Executive to the extent the Company
provides such coverage for its other executive officers.
 

 
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16.
Assignability; Binding Nature.

 
This Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, heirs (in the case of the Executive) and assigns.
No rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company except that such rights or obligations may be
assigned or transferred pursuant to a merger or consolidation in which the
Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of the Company; provided, however, that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law. The Executive may not assign or transfer
any of his rights or obligations under this Agreement.
 

 
17.
Representation.

 
The Company represents and warrants that it is fully authorized and empowered to
enter into this Agreement and that the performance of its obligations under this
Agreement will not violate any agreement between it and any other person, firm
or organization. The Executive represents and warrants that no agreement exists
between him and any other person, firm or organization that would be violated by
the performance of his obligations under this Agreement.
 

 
18.
Entire Agreement.

 
This Agreement contains the entire understanding and agreement between the
Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the Parties with respect thereto. The Parties agree
that as of the Effective Date, the Existing Employment Agreement is null and
void and shall have no further force or effect.
 

 
19.
Amendment or Waiver.

 
No provision in this Agreement may be amended unless such amendment is agreed to
in writing and signed by the Executive and an authorized officer of the Company.
No waiver by either Party of any breach by the other Party of any condition or
provision contained in this Agreement to be performed by such other Party shall
be deemed a waiver of a similar or dissimilar condition or provision at the same
or any prior or subsequent time. Any waiver must be in writing and signed by the
Executive or an authorized officer of the Company, as the case may be.
 

 
20.
Severability.

 
In the event that any provision or portion of this Agreement shall be determined
to be invalid or unenforceable for any reason, in whole or in part, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law. If such
invalidity or unenforceability is caused by length of time or size of area, or
both, the otherwise invalid provision shall be considered to be reduced to a
period or area which would cure such invalidity.
 

 
21.
Survivorship.

 
The respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive’s employment hereunder, including without
limitation, the Company’s obligations under Sections 11 and 15 above and the
Executive’s obligations under Sections 13 and 14 above, and the expiration of
the Term of Employment, to the extent necessary to the intended preservation of
such rights and obligations.
 

 
22.
Controlling Document.

 
If any provision of any agreement, plan, program, policy, arrangement or other
written document between or relating to the Company and the Executive conflicts
with any provision of this Agreement, the provision of this Agreement shall
control and prevail.
 

 
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23.
Beneficiaries/References.

 
The Executive shall be entitled, to the extent permitted under any applicable
law, to select and change a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following the Executive’s death by
giving the Company written notice thereof. In the event of the Executive’s death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
 

 
24.
Governing Law/Jurisdiction.

 
This Agreement shall be governed by and construed and interpreted in accordance
with the laws of the State of California without reference to principles of
conflict of laws unless superseded by federal law.
 

 
25.
Resolution of Disputes.

 
Any disputes arising under or in connection with this Agreement shall be
resolved by binding arbitration, to be held in Los Angeles, California or any
other location mutually agreed to by the Parties in accordance with the rules
and procedures of the American Arbitration Association governing employment
disputes. The Executive and the Company shall mutually select the arbitrator. If
the Executive and the Company cannot agree on the selection of an arbitrator,
each Party shall select an arbitrator and the two arbitrators shall select a
third arbitrator who shall resolve the dispute. Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof. All
arbitration costs shall be shared equally by the Parties, and all other costs
shall be borne by the Party incurring such cost.
 

 
26.
Notices.

 
All notices shall be in writing, shall be sent to the following addresses listed
below or to such other address as either Party shall request by notice to the
other in accordance with this Section 26, using a reputable overnight express
delivery service, and shall be deemed to be received when sent.
 
If to the Company:
  
All American Pet Company Inc.
9601 Wilshire Blvd., Suite M200
Beverly Hills, CA 90210
Attention: General Counsel
   
If to the Executive:
  
The Executive’s last known address on file with the Company

 

 
27.
Headings.

 
The headings of the sections contained in this Agreement are for convenience
only and shall not be deemed to control or affect the meaning or construction of
any provision of this Agreement.
 

 
28.
Counterparts.

 
This Agreement may be executed in two or more counterparts, and such
counterparts shall constitute one and the same instrument. Signatures delivered
by facsimile shall be deemed effective for all purposes to the extent permitted
under applicable law.
 
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
 
ALL AMERICAN PET COMPANY INC.
   
By:
   
Name:
 
Lisa Bershan
Title:
 
Director/Acting Chair of the Compensation Committee
 
By:
 
Barry Schwartz

 
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EXHIBIT A
 
RELEASE
 
This RELEASE (“Release”) dated as of this                      day between All
American pet Company Inc., a Maryland corporation (the “Company”), and Barry
Schwartz (the “Executive”).
 
WHEREAS, the Company and the Executive previously agreed to the terms of
employment under which the Executive was employed to serve as the Company’s
Chairman and Chief Executive Officer; and
 
WHEREAS, pursuant to this Employment Agreement, the Executive is entitled to
certain compensation and benefits upon the execution of this Release;
 
NOW, THEREFORE, in consideration of the premises and mutual agreements contained
herein and in the Employment Agreement, the Company and the Executive agree as
follows:
 
1. Subject to Paragraph 3 below, the Executive, on his own behalf and on behalf
of his heirs, estate, beneficiaries and assigns, does hereby release the
Company, and any of its Subsidiaries or affiliates, and each past or present
officer, director, agent, employee, shareholder, and insurer of any such
entities, from any and all claims made, to be made, or which might have been
made of whatever nature, whether known or unknown, from the beginning of time,
including those that arose as a consequence of his employment with the Company,
or arising out of the severance of such informal employment relationship which
Executive has been working without an Employment Agreement, or arising out of
any act committed or omitted during or after the existence of such employment
relationship, all up through and including the date on which this Release is
executed, including, but not limited to, those which were, could have been or
could be the subject of an administrative or judicial proceeding filed by the
Executive or on his behalf under federal, state or local law, whether by
statute, regulation, in contract or tort, and including, but not limited to,
every claim for front pay, back pay, wages, bonus, fringe benefit, any form of
discrimination (including but not limited to, every claim of race, color, sex,
religion, national origin, disability or age discrimination), wrongful
termination, emotional distress, pain and suffering, breach of contract,
compensatory or punitive damages, interest, attorney’s fees, reinstatement or
reemployment. If any court rules that such waiver of rights to file, or have
filed on his behalf, any administrative or judicial charges or complaints is
ineffective, the Executive agrees not to seek or accept any money damages or any
other relief upon the filing of any such administrative or judicial charges or
complaints. The Executive relinquishes any right to future employment with the
Company and the Company shall have the right to refuse to re-employ the
Executive without liability. The Executive acknowledges and agrees that even
though claims and facts in addition to those now known or believed by him to
exist may subsequently be discovered, it is his intention to fully settle and
release all claims he may have against the Company and the persons and entities
described above, whether known, unknown or suspected.
 
 
2. Subject to Paragraph 3 below, the Company releases and forever discharges,
and by this instrument releases and forever discharges, the Executive from all
debts, obligations, promises, covenants, agreements, endorsements, bonds,
controversies, suits, actions, causes of action, judgments, damages, expenses,
claims or demands of any kind whatsoever (whether known or unknown), in law or
in equity, which it ever had, now has, or which may arise in the future
regarding any matter arising on or before the execution of this Release
regarding the Executive’s employment with or the Executive’s leaving the
employment of the Company.
 
3. The Company and the Executive acknowledge and agree that the release
contained in Paragraphs 1 and 2 does not, and shall not be construed to, release
or limit the scope of any existing obligation of the Company (i) to pay or
provide any compensation or benefit required to be paid or provided under the
Employment Agreement, (ii) to indemnify the Executive for his acts as an officer
or director of the Company in accordance with the bylaws of the Company and the
policies and procedures of the Company that are presently in effect including
Section 15 of the Employment Agreement, or (iii) to the Executive and his
eligible, participating dependents or beneficiaries under any existing welfare,
retirement or other fringe-benefit plan or program of the Company in which the
Executive and/or such dependents are participants. The Company and the Executive
acknowledge and agree that the release contained in Paragraphs 1 and 2 does not
apply to any causes of action arising under or in connection with (x) the
Executive’s willful misconduct or any similar action or actions not known by the
Company as of the date of this Release nor (y) any post-termination of
employment obligations of the Company or the Executive under the Employment
Agreement.

 
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4. The Executive acknowledges that he has been provided at least 21 days to
review the Release and has been advised to review it with an attorney of his
choice. In the event the Executive elects to sign this Release prior to this
21-day period, he agrees that it is a knowing and voluntary waiver of his right
to wait the full 21 days. The Executive further understands that he has 7 days
after the signing hereof to revoke it by so notifying the Company in writing,
such notice to be received by                      within the 7-day period. The
Executive further acknowledges that he has carefully read this Release, and
knows and understands its contents and its binding legal effect. The Executive
acknowledges that by signing this Release, he does so of his own free will and
act and that it is his intention that he be legally bound by its terms.
 
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