Exhibit 10.41

 

March 21, 2018

 

 

Mr. Adam M. Kleinman

11 Applecrest Road

Weston, MA 02493

 

Dear Mr. Kleinman:

 

This offer letter (this “Offer Letter”) sets forth the terms of your employment
as of the date hereof (the “Effective Date”) as President and Chief Operating
Officer of Great Elm Capital Group, Inc. (“GECG”) and as Managing Director,
Chief Operating Officer and General Counsel of Great Elm Capital Management,
Inc. (“GECM” and, together with GECG, the “Company”).  Upon your acceptance of
this Offer Letter, this Offer Letter amends and restates as of the Effective
Date our agreement with respect to your employment with GECM dated September 18,
2017 (the “Amended Agreement”), which Amended Agreement amended and restated as
of the effective date thereof our agreement with respect to your employment with
GECM dated November 3, 2016.

 

1.

Title. You will serve as President and Chief Operating Officer of GECG reporting
directly to GECG’s Chief Executive Officer and you will serve as a Managing
Director, Chief Operating Officer and General Counsel of GECM reporting directly
to GECM’s Chief Investment Officer and you will be a member of GECM’s management
committee and investment committee.

 

2.

Employment Location.  You are expected to work at the Company’s corporate
headquarters in the greater Boston area.

 

3.

Base Salary. Your annual base salary rate will be $250,000.00, less applicable
withholdings and deductions, commencing on September 1, 2017, and paid in
accordance with the Company’s payroll practices in effect from time to time.

 

4.

Bonus. You will be eligible to participate in the Great Elm Capital Management
Performance Bonus Plan (the “Plan”) beginning on October 1, 2017.  Your targeted
bonus level under the Plan will be $194,902 for the twelve months beginning
October 1, 2017 and ending September 30, 2018 and the cap for such period shall
be 150%, subject to, and in accordance with, the terms of the
Plan.  Additionally, the Company has the right, but not any obligation, to award
you additional bonuses in its sole discretion. For any period after September
30, 2018, there is no guarantee that you will be awarded any bonus in any period
or be eligible for a bonus under that Plan or any other bonus or incentive plan
for any period.

 

5.

Equity Incentives.

 

5.1

Stock Options.

 

(a)

The compensation committee (the “Compensation Committee”) of the board of
directors of GECG has awarded you options to purchase 213,000 shares of GECG
common stock at an exercise price equal to the closing price of the shares on
the Effective Date.  These options vest twenty percent on the first anniversary
of the Effective Date and monthly thereafter such that they will be fully vested
five years from the Effective Date.

 

(b)

The Compensation Committee also has awarded you options to purchase 194,175
shares of GECG common stock at an exercise price equal to the closing price of
the shares on the Effective Date.  These options vest fifty percent on the
six-month anniversary of the Effective Date and monthly thereafter such that
they are fully vested on the first anniversary of the Effective Date.

 

The terms of the options described in Sections 5.1(a) and 5.1(b) are set forth
in separate notices of grant and award agreements that, along with the GECG 2016
Long-Term Incentive Plan, govern such options (the “Option Award”).  You will be
eligible for periodic additional option grants in the sole discretion of the
Compensation Committee and there is no assurance that any such award will be
made at any future time.

 

 

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5.2

Performance Shares.  All performance shares you hold as of the Effective Date
will be amended concurrent with the delivery of this Offer Letter pursuant to
the Amended and Restated Notice of Performance Stock Award delivered to you
concurrent herewith to provide that all vesting/repurchase criteria thereunder
will be deemed satisfied if (a) GECM, directly or indirectly, sells, assigns,
distributes, participates, delegates or encumbers its economic interest (other
than to GECC GP Corp or GECG) under the Investment Management Agreement, dated
as of September 27, 2016, by and between GECM and Great Elm Capital Corp. (as
such agreement may be amended from time to time, the “IMA”) or (b) GECG or any
of its affiliates receives any compensation in connection with the transfer,
sale, assignment, distribution, participation, delegation, encumbrance,
termination, modification or amendment of the IMA.

 

6.

Employee Health and Welfare Benefits. You will be offered benefits, including
participation in the Company’s health, dental and 401(k) plans, consistent with
those offered to similarly-situated employees.

 

7.

Business Expenses.  The Company will reimburse your reasonable out of pocket
expenses incurred in connection with your service, subject to the Company’s
policies as in effect from time to time, and applicable IRS guidelines.

 

8.

At Will Employment. Your employment with the Company is “at will” and may be
terminated at any time by the Company or by you for any reason or no reason.

 

9.

Non-Solicitation.

 

9.1

During the term of your employment and for a period of one year thereafter (no
matter why your employment concluded), you will not, directly or indirectly, on
your own account or on behalf of or in conjunction with any other person or
organization induce or attempt to induce any employee of the Company or its
affiliates to leave the employment of the Company or its affiliates (whether or
not such would be a breach of contract by such employee).

 

9.2

During the term of your employment and for a period of one year thereafter (no
matter why your employment concluded), you will not, directly or indirectly, on
your own account or on behalf of or in conjunction with any other person or
organization solicit (a) any investor in GECM or in any managed/advised
investment vehicle of GECM or (b) any borrower or other investee in which GECM
or any managed/advised investment vehicle of GECM holds an investment or (c) any
entity in which GECG holds or, to your knowledge, is seeking to acquire, a
controlling interest, provided that you either (x) had business-related contact
with such investor, borrower or other investee or entity during your employment
with the Company or (b) learned non-public information about such investor,
borrower or other investee or entity in the course of your employment with the
Company.  Nothing in this Section 9.2 shall prohibit you from directly or
indirectly soliciting any such investor, borrower or other investee or entity if
prior to such solicitation (i) such investor has not been a fee-paying investor
in GECM or in any managed or advised investment vehicle of GECM for one year
prior to such solicitation, (ii) GECM and any investment vehicle managed by GECM
are no longer invested in such borrower or other investee or (iii) GECG no
longer holds or, to your knowledge, is seeking to acquire, a controlling
interest in such entity.

 

9.3

The restrictions contained in this Section 9 are necessary for the protection of
the trade secrets, confidential information and goodwill of the Company and are
considered by you to be reasonable for such purpose.  You stipulate that
irrevocable harm will result from breach of your obligations under this Section
9. Therefore, in the event of any such breach or threatened breach, you agree
that the Company, in addition to such other remedies which may be available,
shall have the right to obtain an injunction from a court restraining such a
breach or threatened breach and the right to specific performance of the
provisions of this Section 9 and you hereby waive the adequacy of a remedy at
law as a defense to such relief.

 

9.4

You stipulate that the remedies at law are inadequate to compensate the Company
for breach of your obligations under this Section 9 and the CIAA (as defined
below) and that enforcement of the provisions of each of this Section 9 and the
CIAA is in the public interest of the market for talent in the investment
management industry and of investors in the investment vehicles managed/advised
by the Company.

 

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9.5

If you materially violate any provision of this Section 9 after the end of your
employment, you agree that you shall continue to be bound by the restrictions in
this Section 9 until a period of one year has expired without any material
violation of this Section 9.

 

10.

Severance.

 

10.1

If the Company terminates your employment without Cause or you terminate your
employment for Good Reason:

 

(a)

You will (i) abide by your obligations under the CIAA and (ii) comply with your
obligations under Section 9.

 

(b)

If you execute a customary mutual release and do not exercise any revocation
rights you may have, the Company will (i) execute a customary mutual release,
(ii) after expiration of any rescission periods under applicable law, but in no
event more than 70 days following your termination of employment, pay you a lump
sum equal to (A) $650,000 if such termination occurs on or prior to the first
anniversary of the Effective Date and (B) $550,000 if such termination occurs
thereafter, (iii) reimburse you all premiums paid by you to continue health and
dental insurance for you and your family for a period of one year post
employment, provided that you timely elect COBRA coverage with respect to any
such health and dental insurance;  and (iv)  (A) accelerate the vesting of the
shares subject to the options referred to in Section 5.1(b) by crediting six
months of service (if no vesting had occurred as of the date of termination),
(B) if such termination occurs within two years following a Change of Control,
accelerate all remaining vesting of the options referred to in Section 5.1(a)
and (C) accelerate the vesting of shares subject to the options referred to in
Section 5.1(a) by crediting twelve months of service (in addition to any vesting
that had occurred as of the date of termination).

 

(c)

Notwithstanding the foregoing, if your employment terminates at any time for any
reason, the Company will pay you (i) any bonus under Section 4 above for any
fully completed plan period which had concluded prior to the date on which
termination occurs and (ii) any bonus payments from prior periods that had been
deferred in accordance with the terms of the Plan, in each case, as and when
such payments are made to other employees of the Company in accordance with the
terms of the Plan.

 

10.2

Best Net After Tax Adjustment

 

(a)

If amounts under Section 10.1 would be subject to any excise tax imposed by
Sections 409A or 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”), (such excise tax together with any such interest and penalties, shall
be referred to as the “Excise Tax”), then a calculation shall first be made
under which such payments or benefits provided to you are reduced to the extent
necessary so that no portion thereof shall be subject to the Excise Tax (the
“4999 Limit”).  The Company shall then compare (1) your Net After-Tax Benefit
(as defined below) assuming application of the 4999 Limit with (2) your Net
After-Tax Benefit without application of the 4999 Limit. If (1) is greater than
(2), you will receive amounts under Section 10.1 solely up to the 4999 Limit.
 If (2) is greater than (1), then you will be entitled to receive all amounts as
specified in Section 10.1 without adjustment, and shall be solely liable for any
and all Excise Tax related thereto. “Net After-Tax Benefit” shall mean the sum
of (i) all payments that you receive or are entitled to receive that are
contingent on 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 within
the meaning of Section 280G(b)(2) of the Code, less (ii) the amount of federal,
state, local, employment, and Excise Tax (if any) imposed with respect to such
payments.

 

(b)

If amounts must be reduced pursuant to Section 10.2(a), you may select the order
of reduction, but none of the selected amounts may be “nonqualified deferred
compensation” subject to Section 409A of the Code.  If you fail to select an
order in which amounts are to be reduced, or cannot select such an order without
selecting payments that would be “nonqualified deferred compensation” subject to
Section 409A of the Code, the Company shall (to the extent feasible) reduce
accelerated equity incentive vesting first (to the extent the value of such
accelerated vesting for 280G purposes is not determined pursuant to Treasury
Regulation Section 1.280G-1 Q&A 24(c)), followed by cash payments and in the
order in which such payments would be made (with payments made closest to the
Change in Control being reduced first), followed by accelerated equity incentive
vesting (to the extent the value of such accelerated vesting is determined
pursuant to Treasury Regulation Section 1.280G-1 Q&A 24(c)), and followed last
by the continued health and welfare benefits.

 

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(c)

The calculations in this Section 10.2 shall be made by a certified public
accounting firm, executive compensation consulting firm, or law firm designated
by the Company in its sole and absolute discretion, and shall be determined
using reasonable assumptions and approximations concerning applicable taxes and
relying on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code.  The costs of performing such calculations
shall be borne exclusively by the Company.

 

10.3

For purposes of this Offer Letter, “Cause” shall mean: (a) your theft,
dishonesty, misconduct, or falsification of any of the Company’s or its
affiliates’ records; (b) any action by you outside of the scope of your
employment agreement with the Company that has a material detrimental effect on
the Company’s reputation or business as reasonably determined by the Company’s
board of directors; (c) your substantial failure or inability to perform any
reasonably assigned duties within the scope of your employment agreement with
the Company that has not been cured within thirty business days of written
notice from the Company to you, in each case, as determined by the Company’s
board of directors in its sole discretion; (d) your material violation of any
Company policy; (e) your conviction (including any plea of guilty or no contest)
of any criminal act (other than traffic violations); or (f) your material breach
of any written agreement with the Company or its affiliates which has not been
cured within ten business days’ of written notice from the Company to you
thereof.

 

10.4

For purposes of this Offer Letter, “Good Reason” shall mean your resignation
from the Company within six months after the occurrence of any of the following
events: (a) without your express prior written consent, the significant
reduction of your duties, authority, responsibilities, job title, or reporting
relationships relative to your duties, authority, responsibilities, job title,
or reporting relationships as in effect immediately prior to such reduction, or
the assignment to you of such reduced duties, authority, responsibilities, job
title, or reporting relationships; (b) without your express prior written
consent, a reduction by the Company of your base salary or bonus target as in
effect immediately prior to such reduction or the Company’s failure to pay such
amounts when due; (c) a material reduction by the Company in the kind or level
of employee benefits, excluding salary and bonuses, to which you were entitled
immediately prior to such reduction with the result that your overall benefits
package is significantly reduced (unless such reduction is part of a program
generally applicable to other similar level employees of the Company); (d) the
relocation of your principal place of work to a facility or a location more than
twenty five miles from your then present location, without your express prior
written consent or (e) breach by the Company of its obligations hereunder or
under any incentive or performance award (including under the related notices of
grant and award agreements) granted to you by the Company or its affiliates,
including, without limitation, the equity incentive awards (and related notices
of grant and award agreements) referred to in Sections 5.1(a), 5.1(b) and 5.2
above; provided, however, that in each case, your resignation shall not
constitute Good Reason under this provision unless (i) you provide the Company
with written notice of the applicable event or circumstance within thirty days
after you first have knowledge of it, which notice reasonably identifies the
event or circumstance that you believe constitutes grounds for Good Reason, and
(ii) the Company fails to correct the event or circumstance so identified within
thirty days after receipt of such notice.

 

10.5

For purposes of this Offer Letter, “Change of Control” shall have the meaning
given to such term in the GECG 2016 Long-Term Incentive Plan as in effect on the
Effective Date.

 

11.

General Provisions.

 

11.1

You understand, acknowledge and agree that your obligations under this Offer
Letter shall continue in accordance with the express terms of this Offer Letter
regardless of any changes in your title, position, duties, salary or other
compensation or other terms and conditions of employment, and that no change in
any of the foregoing shall be considered to end your employment for purposes of
this Offer Letter.

 

11.2

You confirm that the employee confidentiality and invention assignment agreement
(the “CIAA”) you entered into with the Company is in full force and effect.

 

11.3

You confirm that you are a citizen of the U.S., a noncitizen national of the
U.S., a lawful permanent resident, or an alien authorized to work in the U.S.

 

11.4

Amounts payable hereunder (net of taxes) shall be subject to the GECG’s claw
back policies if its financial statements are restated (a “Restatement”) or as
otherwise required by applicable law or listing requirement;

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provided that, except as mandated by applicable law or listing rule, in the
event of a claw-back because of a Restatement, (a) the Company may only
claw-back payments earned in the period to which the Restatement applies and (b)
in no event may the Company claw back any payments earned in periods occurring
more than three years prior to such Restatement.  Claw backs by the Company
required under applicable law shall not constitute a breach of the Company’s
obligations hereunder nor constitute Good Reason.

 

11.5

You are expected to devote substantially all of your business efforts to service
of the Company under this Offer Letter.  Subject to the Company’s code of ethics
as in effect from time to time, you may participate in charitable, religious or
civic organizations that do not materially interfere with your work.

 

11.6

This Offer Letter and the matters covered hereby will be governed by and
construed under the laws of the Commonwealth of Massachusetts.

 

11.7

Any dispute arising out of or relating to this Offer Letter or the breach
thereof or otherwise arising out of your employment or the termination of that
employment (including, without limitation, any claims of unlawful employment
discrimination or any other claims based on any statute) shall, to the fullest
extent permitted by law, be settled by arbitration before a single arbitrator in
Boston pursuant to the JAMS Employment Arbitration Rules and Procedures as then
in effect, subject to a direction to the arbitrator to apply such rules in a
manner to minimize cost and maximize efficiency and speed of resolution to the
maximum reasonable extent permitted under such rules and applicable law
consistent with obtaining a fully enforceable resolution of such dispute.  The
arbitrator must only choose between the position, in total, that you advance or
the position, in total, that the Company advances as the closest to the correct
resolution of all matters being arbitrated based on the law and the facts.  This
paragraph shall be specifically enforceable. Notwithstanding the foregoing, this
paragraph shall not preclude either party from pursuing a court action for the
sole purpose of obtaining a temporary restraining order or a preliminary
injunction in circumstances in which such relief is appropriate; provided that
any other relief shall be pursued through an arbitration proceeding pursuant to
this paragraph.

 

11.8

This Offer Letter, the award agreements evidencing your option grants, the CIAA,
and the Stock Subscription Agreement, dated as of June 22, 2016, among GECC GP
Corp., you and the other parties signatory thereto, as amended on the Effective
Date, the documents governing your existing equity incentive awards, together
with all of the Company’s policies and procedures relating to employees, as in
effect from time to time, including its Code of Ethics, as in effect from time
to time (collectively, “Employment Documents”), constitute our entire agreement
with respect to your employment with the Company and no prior negotiations,
drafts, arrangements or understandings with respect thereto shall be of any
effect. The Amended Agreement shall be of no further effect for periods from and
after the Effective Date.

 

11.9

The Company’s benefits, payroll, and other human resource management services
may be provided through one or more of the Company’s affiliates or a
professional employer organization. As a result of this arrangement, the
affiliate or the professional employment organization will be considered your
employer of record for these purposes; however, the Company’s Chief Investment
Officer will be responsible for directing your work, reviewing your performance,
setting your schedule and otherwise directing your work at the Company.

 

11.10

If any provision of this Offer Letter is held by an arbitrator or court of
competent authority to be unenforceable, the parties intend that (a) the
remaining provisions of this Agreement shall be enforced in accordance with
their terms and (b) the court shall substitute a replacement provision that is
enforceable that, as closely as possible, accomplishes the purposes intended by
such original provision.

 

11.11

Any amendment or modification to this Offer Letter may only be made pursuant to
a written agreement executed by each of the parties hereto.

 

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If this Offer Letter correctly sets forth the terms of our agreement, please
sign and return this Offer Letter whereupon it shall become our binding
agreement.

 

Very truly yours,

 

_/s/Peter A. Reed         ____

 

Peter A. Reed

Chief Executive Officer

Great Elm Capital Group, Inc.

 

Accepted and agreed to as of the Effective Date:

 

 

_/s/Adam M. Kleinman____

Adam M. Kleinman

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