Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of March 28, 2006
between 1-800 CONTACTS, INC., a Delaware corporation (the “Company”), and
Jonathan Coon (the “Executive”). This Agreement shall be effective as of
March 30, 2006 (the “Effective Date”).

 

In consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.                                       EMPLOYMENT. THE COMPANY SHALL EMPLOY
EXECUTIVE, AND EXECUTIVE HEREBY ACCEPTS EMPLOYMENT WITH THE COMPANY, UPON THE
TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT, FOR THE PERIOD BEGINNING ON
THE EFFECTIVE DATE AND ENDING AS PROVIDED IN PARAGRAPH 4 HEREOF (THE “EMPLOYMENT
PERIOD”).

 

2.                                       POSITION AND DUTIES.

 

(A)                                  DURING THE EMPLOYMENT PERIOD EXECUTIVE
SHALL SERVE AS CHIEF EXECUTIVE OFFICER FOR THE COMPANY AND SHALL HAVE SUCH
DUTIES, AUTHORITIES AND RESPONSIBILITIES COMMENSURATE WITH THE DUTIES,
RESPONSIBILITIES AND AUTHORITIES OF PERSONS IN SIMILAR CAPACITIES IN SIMILARLY
SIZED COMPANIES AND SUCH OTHER DUTIES, RESPONSIBILITIES AND AUTHORITY ASSIGNED
TO EXECUTIVE BY THE COMPANY’S CHIEF EXECUTIVE OFFICER OR PRESIDENT THAT ARE NOT
INCONSISTENT WITH EXECUTIVE’S POSITION AS CHIEF EXECUTIVE OFFICER, OR SHALL
SERVE AS SUCH OTHER SENIOR MANAGEMENT POSITION AS ASSIGNED TO EXECUTIVE BY THE
CHIEF EXECUTIVE OFFICER OF THE COMPANY (THE “CHIEF EXECUTIVE OFFICER”), THE
PRESIDENT OF THE COMPANY (THE “PRESIDENT”) OR THE BOARD OF DIRECTORS OF THE
COMPANY (THE “BOARD”).

 

(B)                                 EXECUTIVE SHALL REPORT TO THE BOARD OR SUCH
OTHER PERSONS AS THE BOARD MAY DIRECT FROM TIME TO TIME, AND EXECUTIVE SHALL
DEVOTE EXECUTIVE’S BEST EFFORTS AND FULL BUSINESS TIME AND ATTENTION (EXCEPT FOR
PERMITTED VACATION PERIODS AND REASONABLE PERIODS OF ILLNESS OR OTHER
INCAPACITY) TO THE BUSINESS AND AFFAIRS OF THE COMPANY AND ITS AFFILIATES (AS
HEREINAFTER DEFINED). EXECUTIVE SHALL PERFORM EXECUTIVE’S DUTIES AND
RESPONSIBILITIES TO THE BEST OF EXECUTIVE’S ABILITIES IN A DILIGENT,
TRUSTWORTHY, BUSINESSLIKE AND EFFICIENT MANNER.

 

(C)                                  FOR PURPOSES OF THIS AGREEMENT, “AFFILIATE”
SHALL MEAN A PERSON THAT DIRECTLY, OR INDIRECTLY THROUGH ONE OR MORE
INTERMEDIARIES, CONTROLS, OR IS CONTROLLED BY OR IS UNDER COMMON CONTROL WITH
ANOTHER PERSON (WITHIN THE MEANING OF RULE 12B-2) PROMULGATED UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

3.                                       BASE SALARY AND BENEFITS.

 

(A)                                  EXECUTIVE’S INITIAL BASE SALARY SHALL BE
$210,000 PER ANNUM, WHICH SALARY SHALL BE PAYABLE IN REGULAR INSTALLMENTS IN
ACCORDANCE WITH THE COMPANY’S GENERAL PAYROLL PRACTICES AND SHALL BE SUBJECT TO
CUSTOMARY DEDUCTIONS AND WITHHOLDING. THEREAFTER, THE COMPANY SHALL PERIODICALLY
REVIEW EXECUTIVE’S BASE SALARY FOR INCREASE BUT NOT DECREASE (PRESENTLY
CONDUCTED

 

--------------------------------------------------------------------------------

 

ON AN ANNUAL BASIS). THE BASE SALARY AS DETERMINED HEREIN FROM TIME TO TIME
SHALL CONSTITUTE “BASE SALARY” FOR PURPOSES OF THIS AGREEMENT.

 

(B)                                 IN ADDITION TO THE BASE SALARY, EXECUTIVE
SHALL BE ELIGIBLE TO PARTICIPATE IN THE COMPANY’S BONUS AND OTHER INCENTIVE
COMPENSATION PLANS AND PROGRAMS IN EFFECT FROM TIME TO TIME FOR THE COMPANY’S
SENIOR EXECUTIVES. EXECUTIVE SHALL HAVE THE OPPORTUNITY TO EARN AN ANNUAL BONUS
(THE “BONUS”) FOR EACH FISCAL YEAR DURING THE EMPLOYMENT PERIOD WITH A TARGET
BONUS THAT WILL NOT BE LESS THAN THE TARGET ANNUAL BONUS EXECUTIVE IS ELIGIBLE
TO RECEIVE AS OF THE EFFECTIVE DATE OR THAT EXECUTIVE MAY HEREAFTER BECOME
ELIGIBLE TO RECEIVE.

 

(C)                                  DURING THE EMPLOYMENT PERIOD, EXECUTIVE
SHALL BE, TO THE EXTENT ELIGIBLE, ENTITLED TO PARTICIPATE IN THE EMPLOYEE
BENEFIT PROGRAMS MADE AVAILABLE TO ALL EMPLOYEES OF THE COMPANY ACCORDING TO
THEIR TERMS. IN ADDITION, EXECUTIVE SHALL BE ENTITLED TO OTHER PERQUISITES AND
FRINGE BENEFITS IN SUCH AMOUNTS AS DETERMINED BY THE CHIEF EXECUTIVE OFFICER OR
THE PRESIDENT IN ACCORDANCE WITH COMPANY POLICY AND PRACTICE AND AS APPROVED BY
THE COMPENSATION COMMITTEE. WITHOUT LIMITING THE FOREGOING, EXECUTIVE SHALL BE
ENTITLED TO THE FOLLOWING BENEFITS DURING THE EMPLOYMENT PERIOD:

 

(I)                                     PARTICIPATION IN ANY LONG-TERM INCENTIVE
PLAN ADOPTED BY THE COMPANY FOR THE BENEFIT OF SENIOR EXECUTIVES OF THE COMPANY
AS DETERMINED BY THE BOARD (OR A COMMITTEE THEREOF);

 

(II)                                  FOUR WEEKS (20 WORKING DAYS) OF PAID
VACATION EACH YEAR (AS PRORATED FOR PARTIAL YEARS), IN ADDITION TO HOLIDAYS, IN
ACCORDANCE WITH THE COMPANY’S POLICY ON ACCRUAL AND USE APPLICABLE TO SENIOR
EXECUTIVES, WHICH VACATION MAY BE TAKEN AT SUCH TIMES AS MUTUALLY AGREED BETWEEN
EXECUTIVE AND THE COMPANY; AND

 

(III)                               REIMBURSEMENT FOR ALL REASONABLE AND
NECESSARY TRAVEL, ENTERTAINMENT AND OTHER BUSINESS EXPENSES INCURRED BY
EXECUTIVE, IN ACCORDANCE WITH COMPANY POLICY (INCLUDING PRESENTMENT OF
APPROPRIATE DOCUMENTATION).

 

4.                                       EMPLOYMENT PERIOD. EXECUTIVE’S TERM OF
EMPLOYMENT UNDER THIS AGREEMENT (SUCH TERM OF EMPLOYMENT, AS IT MAY BE EXTENDED
OR TERMINATED, IS HEREIN REFERRED TO AS THE “EMPLOYMENT PERIOD”) SHALL BE FOR A
TERM COMMENCING ON THE EFFECTIVE DATE AND, UNLESS TERMINATED EARLIER AS PROVIDED
IN PARAGRAPH 5 HEREOF, ENDING ON THE FIFTH ANNIVERSARY OF THE EFFECTIVE DATE
(THE “ORIGINAL EMPLOYMENT PERIOD”), PROVIDED THAT THE EMPLOYMENT PERIOD SHALL BE
AUTOMATICALLY EXTENDED, SUBJECT TO EARLIER TERMINATION AS PROVIDED IN PARAGRAPH
5 HEREOF, FOR SUCCESSIVE ADDITIONAL TWO (2) YEAR PERIODS (THE “ADDITIONAL
TERMS”), UNLESS, AT LEAST 180 DAYS PRIOR TO THE END OF THE ORIGINAL EMPLOYMENT
TERM OR THE THEN ADDITIONAL TERM, THE COMPANY OR EXECUTIVE HAS NOTIFIED THE
OTHER IN WRITING THAT THE EMPLOYMENT PERIOD SHALL TERMINATE AT THE END OF THE
THEN CURRENT TERM.

 

5.                                       TERMINATION. EXECUTIVE’S EMPLOYMENT AND
THE EMPLOYMENT PERIOD SHALL TERMINATE ON THE FIRST OF THE FOLLOWING TO OCCUR:

 

(A)                                  AUTOMATICALLY ON THE DATE EXECUTIVE DIES.

 

2

--------------------------------------------------------------------------------

 

(B)                                 UPON 30 DAYS’ PRIOR WRITTEN NOTICE BY
EXECUTIVE TO THE COMPANY OF EXECUTIVE’S VOLUNTARY TERMINATION OF EMPLOYMENT
WITHOUT GOOD REASON.

 

(C)                                  UPON WRITTEN NOTICE BY EXECUTIVE TO THE
COMPANY OF A TERMINATION FOR GOOD REASON, UNLESS SUCH EVENTS ARE CORRECTED IN
ALL MATERIAL RESPECTS BY THE COMPANY WITHIN 20 DAYS FOLLOWING WRITTEN
NOTIFICATION BY EXECUTIVE TO THE COMPANY THAT EXECUTIVE INTENDS TO TERMINATE
EMPLOYMENT HEREUNDER FOR GOOD REASON. “GOOD REASON” SHALL MEAN THE OCCURRENCE OF
ANY OF THE FOLLOWING EVENTS, WITHOUT EXECUTIVE’S EXPRESS WRITTEN CONSENT:

 

(I)                                     A SUBSTANTIAL ADVERSE CHANGE IN DUTIES
THAT RESULTS IN EXECUTIVE PERFORMING DUTIES THAT ARE OF A SIGNIFICANTLY LOWER
LEVEL THAN THOSE CUSTOMARILY PERFORMED BY EXECUTIVE DURING THE YEAR PRECEDING
THE TERMINATION OF THE EMPLOYMENT PERIOD.

 

(II)                                  A CHANGE IN EXECUTIVE’S REGULAR WORKSITE
TO A WORKSITE THAT IS MORE THAN 50 MILES BY THE MOST DIRECT ROAD FROM
EXECUTIVE’S REGULAR WORKSITE DURING THE YEAR PRECEDING THE TERMINATION OF THE
EMPLOYMENT PERIOD AND THAT IS ALSO FURTHER FROM EXECUTIVE’S PRINCIPAL RESIDENCE.

 

(III)                               A MATERIAL BREACH OF THIS AGREEMENT BY THE
COMPANY THAT IS NOT CURED, IF CURABLE, WITHIN 30 DAYS AFTER WRITTEN NOTICE AND
DEMAND BY EXECUTIVE INCLUDING, BUT NOT LIMITED TO, ANY FAILURE TO PAY WHEN DUE
EXECUTIVE’S BASE SALARY OR OTHER AMOUNTS DUE UNDER THIS AGREEMENT.

 

(iv)                              The failure of the Company to obtain and
deliver to Executive a written agreement from any successor to the Company to
assume and agree to perform this Agreement

 

Good Reason will cease to exist for an event on the 60th day following its
occurrence, unless Executive shall have given the Company written notice thereof
prior to such date.

 

(D)                                 UPON WRITTEN NOTICE BY THE COMPANY TO
EXECUTIVE OF TERMINATION DUE TO DISABILITY. FOR PURPOSES OF THIS AGREEMENT,
“DISABILITY” SHALL BE DEFINED AS A GOOD FAITH DETERMINATION BY THE CHIEF
EXECUTIVE OFFICER OR PRESIDENT THAT EXECUTIVE HAS BEEN OR WILL BE UNABLE TO
PERFORM EXECUTIVE’S MATERIAL DUTIES HEREUNDER DUE TO A PHYSICAL OR MENTAL
INJURY, INFIRMITY OR INCAPACITY FOR 90 DAYS (INCLUDING WEEKENDS AND HOLIDAYS) IN
ANY 365-DAY PERIOD, REGARDLESS OF WHETHER EXECUTIVE IS DEEMED DISABLED PURSUANT
TO THE COMPANY’S POLICIES OR PLANS.

 

(E)                                  THE COMPANY MAY TERMINATE EXECUTIVE’S
EMPLOYMENT HEREUNDER FOR CAUSE IMMEDIATELY UPON WRITTEN NOTICE BY THE COMPANY TO
EXECUTIVE OF A TERMINATION FOR CAUSE. FOR PURPOSES OF THIS AGREEMENT, “CAUSE”
SHALL MEAN ANY OF THE FOLLOWING:

 

(I)                                     THE WILLFUL AND CONTINUED FAILURE BY
EXECUTIVE TO PERFORM THE DUTIES OF EXECUTIVE’S THEN POSITION OR EXECUTIVE’S
WILLFUL FAILURE TO FOLLOW THE WRITTEN DIRECTION OF THE CHIEF EXECUTIVE OFFICER,
THE PRESIDENT, OTHER MORE SENIOR EXECUTIVE OR THE BOARD.

 

3

--------------------------------------------------------------------------------

 

(II)                                  THE ENGAGING BY EXECUTIVE IN CONDUCT THAT
CAN REASONABLY BE EXPECTED TO BE MATERIALLY MONETARILY OR REPUTATION-WISE
INJURIOUS TO THE COMPANY OR AN AFFILIATE.

 

(III)                               GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF A
MATERIAL NATURE BY EXECUTIVE WITH REGARD TO THE COMPANY OR AN AFFILIATE OR IN
THE PERFORMANCE OF EXECUTIVE’S DUTIES.

 

(IV)                              EXECUTIVE’S INDICTMENT, CONVICTION, PLEADING
GUILTY OR NOLO CONTENDERE TO A FELONY OR OTHER CIVIL OR CRIMINAL OFFENSE
INVOLVING FRAUD, DISHONESTY OR MORAL TURPITUDE.

 

(V)                                 EXECUTIVE’S MATERIAL VIOLATION OF THE
COMPANY’S CODE OF ETHICS OR A MATERIAL BREACH BY EXECUTIVE OF A FIDUCIARY DUTY
OR RESPONSIBILITY TO THE COMPANY OR AN AFFILIATE.

 

(VI)                              EXECUTIVE’S MATERIAL BREACH OF THIS AGREEMENT
OR ANY OTHER WRITTEN AGREEMENT BETWEEN EXECUTIVE AND THE COMPANY OR AN AFFILIATE
THAT IS NOT CURED, IF CURABLE, WITHIN 20 DAYS OF THE GIVING OF WRITTEN NOTICE
THEREOF TO EXECUTIVE (OR SUCH LONGER PERIOD SPECIFIED IN SUCH OTHER AGREEMENT).

 

(F)                                    UPON WRITTEN NOTICE BY THE COMPANY TO
EXECUTIVE OF AN INVOLUNTARY TERMINATION WITHOUT CAUSE, OTHER THAN FOR DEATH OR
DISABILITY.

 

6.                                       CONSEQUENCES OF TERMINATION.

 

(A)                                  UPON A TERMINATION OF THE EMPLOYMENT PERIOD
PURSUANT TO PARAGRAPH 5(A), THE COMPANY SHALL PAY OR PROVIDE EXECUTIVE’S ESTATE
WITH THE FOLLOWING SEVERANCE BENEFITS, SUBJECT TO PARAGRAPH 6(D) HEREOF:

 

(I)                                     THE ACCRUED BENEFITS (AS DEFINED BELOW).

 

(II)                                  CONTINUED PAYMENT OF EXECUTIVE’S BASE
SALARY (BUT NOT AS AN EMPLOYEE) FOR A PERIOD OF 12 MONTHS COMMENCING ON THE DATE
OF TERMINATION.

 

(B)                                 UPON THE EXPIRATION OF THE EMPLOYMENT PERIOD
OR A TERMINATION OF THE EMPLOYMENT PERIOD PURSUANT TO PARAGRAPH 5 (B), (D) AND
(E) HEREOF, THE COMPANY SHALL PAY OR PROVIDE EXECUTIVE (I) ANY UNPAID BASE
SALARY THROUGH THE DATE OF TERMINATION; (II) ANY ANNUAL BONUS EARNED BUT UNPAID
WITH RESPECT TO THE FISCAL YEAR ENDING ON OR PRECEDING THE DATE OF TERMINATION
(OTHER THAN IN CONNECTION WITH A TERMINATION PURSUANT TO PARAGRAPHS 5(B) OR
(E) HEREOF); PROVIDED, HOWEVER, TO THE EXTENT PAYMENT OF SUCH BONUS IS SUBJECT
TO SECTION 409A OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”),
AND THE REGULATIONS ISSUED OR TO BE ISSUED BY THE DEPARTMENT OF THE TREASURY
THEREUNDER (“SECTION 409A”), SUCH PAYMENT SHALL BE MADE AT SUCH TIMES IN SUCH
CALENDAR YEAR AS PROVIDED TO OTHER EXECUTIVES BUT IN NO EVENT PRIOR TO THE
EXPIRATION OF THE SIX-MONTH PERIOD COMMENCING ON THE DATE OF THE EXPIRATION OF
THE EMPLOYMENT PERIOD OR SUCH TERMINATION IF EXECUTIVE IS A “SPECIFIED EMPLOYEE”
WITHIN THE MEANING OF SECTION 409A AND IS NOT OTHERWISE EXEMPT FROM THE
SIX-MONTH DELAY REQUIREMENT UNDER SECTION 409A; (III) REIMBURSEMENT FOR ANY
UNREIMBURSED EXPENSES INCURRED THROUGH THE

 

4

--------------------------------------------------------------------------------

 

DATE OF TERMINATION; AND (IV) ALL OTHER PAYMENTS, BENEFITS OR FRINGE BENEFITS TO
WHICH EXECUTIVE MAY BE ENTITLED UNDER THE TERMS OF ANY APPLICABLE COMPENSATION
ARRANGEMENT OR BENEFIT, EQUITY OR FRINGE BENEFIT PLAN OR PROGRAM OR GRANT OR
THIS AGREEMENT (COLLECTIVELY ITEMS (I) THROUGH (V) SHALL BE HEREAFTER REFERRED
TO AS “ACCRUED BENEFITS”).

 

(C)                                  UPON A TERMINATION OF THE EMPLOYMENT PERIOD
PURSUANT TO PARAGRAPH 5(C) OR (F) HEREOF, EXECUTIVE SHALL BE ENTITLED TO RECEIVE
THE FOLLOWING SEVERANCE BENEFITS, SUBJECT TO PARAGRAPH 6(D) HEREOF:

 

(I)                                     THE ACCRUED BENEFITS.

 

(II)                                  CONTINUED PAYMENT OF EXECUTIVE’S BASE
SALARY (BUT NOT AS AN EMPLOYEE) FOR A PERIOD OF 12 MONTHS COMMENCING ON THE DATE
OF TERMINATION OR SUCH LATER DATE PROVIDED FOR UNDER SECTION 409A WITHOUT
TRIGGERING ADVERSE TAX CONSEQUENCES TO EXECUTIVE UNDER SECTION 409A; PROVIDED,
HOWEVER, THAT IF SUCH PAYMENTS COMMENCE MORE THAN 30 DAYS FOLLOWING THE DATE OF
TERMINATION, THE FIRST SUCH PAYMENT SHALL EQUAL THE SUM OF ALL PAYMENTS THAT
WOULD HAVE BEEN MADE FROM THE DATE OF TERMINATION TO THE DATE OF SUCH FIRST
PAYMENT WERE IT NOT FOR THE DELAY IN PAYMENT FOR SECTION 409A PURPOSES.

 

(III)                               A PRO-RATA PORTION OF EXECUTIVE’S BONUS FOR
THE PERFORMANCE YEAR IN WHICH EXECUTIVE’S TERMINATION OCCURS AT THE TIME THAT
ANNUAL BONUSES ARE PAID TO OTHER SENIOR EXECUTIVES OR SUCH LATER DATE PROVIDED
FOR UNDER SECTION 409A WITHOUT TRIGGERING ADVERSE TAX CONSEQUENCES TO EXECUTIVE
(DETERMINED BY MULTIPLYING THE AMOUNT EXECUTIVE WOULD HAVE RECEIVED BASED SOLELY
UPON ACHIEVEMENT OF CORPORATE FINANCIAL TARGETS HAD EMPLOYMENT CONTINUED THROUGH
THE END OF THE PERFORMANCE YEAR, AS DETERMINED BY THE BOARD IN GOOD FAITH, BY A
FRACTION, THE NUMERATOR OF WHICH IS THE NUMBER OF DAYS DURING THE PERFORMANCE
YEAR OF TERMINATION THAT EXECUTIVE IS EMPLOYED BY THE COMPANY AND THE
DENOMINATOR OF WHICH IS 365);

 

(IV)                              TO THE EXTENT EXECUTIVE IS ELIGIBLE TO AND
DOES ELECT COBRA CONTINUATION COVERAGE WITH RESPECT TO SOME OR ALL OF THE
COMPANY’S HEALTH PLANS, THE COMPANY SHALL CONTINUE TO PAY A SHARE OF THE
“APPLICABLE PREMIUM” FOR SUCH COVERAGE UNTIL SUCH COVERAGE OR THE SALARY
CONTINUATION PERIOD DESCRIBED IN PARAGRAPH 6 HEREOF ENDS OR UNTIL EXECUTIVE
RECEIVES HEALTH COVERAGE UNDER THE PLANS AND PROGRAMS OF A SUBSEQUENT EMPLOYER,
WHICHEVER IS EARLIER, PROVIDED EXECUTIVE CONTINUES TO TIMELY PAY EXECUTIVE’S
SHARE OF THE “APPLICABLE PREMIUM” FOR SUCH COVERAGE. THE COMPANY’S SHARE SHALL
BE THE SAME PORTION OF THE NORMAL COST OF GROUP HEALTH COVERAGE BORNE BY THE
COMPANY FOR SIMILARLY SITUATED ACTIVE EMPLOYEES AT THE SAME COVERAGE LEVEL (SUCH
AS EMPLOYEE-ONLY OR EMPLOYEE-PLUS-SPOUSE) AS EXECUTIVE, DISREGARDING COVERAGE
LEVELS HIGHER THAN THE LEVEL OF EXECUTIVE ON THE LAST DAY OF THE EMPLOYMENT
PERIOD; PROVIDED, HOWEVER, THAT IF SUCH PAYMENTS COMMENCE MORE THAN 30 DAYS
FOLLOWING THE DATE OF TERMINATION, THE FIRST SUCH PAYMENT SHALL EQUAL THE

 

5

--------------------------------------------------------------------------------

 

SUM OF ALL PAYMENTS THAT WOULD HAVE BEEN MADE FROM THE DATE OF TERMINATION TO
THE DATE OF SUCH FIRST PAYMENT WERE IT NOT FOR THE DELAY IN PAYMENT FOR
SECTION 409A PURPOSES.

 

PAYMENTS PROVIDED IN THIS PARAGRAPH 6(C) SHALL BE IN LIEU OF ANY TERMINATION OR
SEVERANCE PAYMENTS OR BENEFITS FOR WHICH EXECUTIVE MAY BE ELIGIBLE UNDER ANY OF
THE PLANS, POLICIES OR PROGRAMS OF THE COMPANY.

 

(D)                                 ANY SEVERANCE BENEFIT THAT WOULD OTHERWISE
BE PAYABLE PURSUANT TO PARAGRAPH 6(B) OR (C) HEREOF SHALL BE PAID SUBJECT TO THE
FOLLOWING RULES:

 

(I)                                     NO SEVERANCE BENEFIT (OR, IN THE EVENT
OF EXECUTIVE’S DEATH, ANY SEVERANCE BENEFIT BEYOND THE FIRST MONTH’S SEVERANCE
BENEFIT) SHALL BE PAID UNLESS EXECUTIVE (OR, IN THE EVENT OF EXECUTIVE’S DEATH,
EXECUTIVE’S ESTATE) SIGNS A RELEASE IN A FORM AND MANNER ACCEPTABLE TO THE
COMPANY, WHICH WILL BE SIMILAR TO EXHIBIT A TO THIS AGREEMENT, AND DOES NOT
REVOKE THAT RELEASE WITHIN THE TIME PRESCRIBED BY LAW OR THE TERMS OF THE
RELEASE.

 

(II)                                  IF THE COMPENSATION COMMITTEE OF THE BOARD
DETERMINES IN GOOD FAITH, AFTER GIVING EXECUTIVE WRITTEN NOTICE SETTING FORTH
THE FACTUAL BASIS OF SUCH DETERMINATION AND A REASONABLE OPPORTUNITY FOR
EXECUTIVE TO RESPOND, THAT EXECUTIVE HAS VIOLATED ANY OF THE PROVISIONS OF
PARAGRAPHS 7, 8 OR 9 HEREOF, NO SEVERANCE BENEFIT SHALL BE PAID, ANY SEVERANCE
BENEFIT IN PAY STATUS SHALL IMMEDIATELY CEASE TO BE PAID AND ANY SEVERANCE
BENEFIT PAID TO EXECUTIVE SUBSEQUENT TO EXECUTIVE’S VIOLATION OF THE PROVISIONS
OF PARAGRAPHS 7, 8 OR 9 HEREOF SHALL BE IMMEDIATELY REPAID TO THE COMPANY. THE
RIGHT GRANTED TO THE COMPANY BY THIS PARAGRAPH SHALL NOT LIMIT THE COMPANY’S
RIGHT TO ANY ADDITIONAL LEGAL OR EQUITABLE RELIEF, INCLUDING AN INJUNCTION.

 

(E)                                  IN THE EVENT THAT EXECUTIVE BECOMES
ENTITLED TO PAYMENTS AND/OR BENEFITS WHICH WOULD CONSTITUTE “PARACHUTE PAYMENTS”
WITHIN THE MEANING OF SECTION 280G(B)(2) OF THE CODE, THE PROVISIONS OF
EXHIBIT B SHALL APPLY.

 

7.                                       CONFIDENTIAL INFORMATION; RETURN OF
PROPERTY. EXECUTIVE ACKNOWLEDGES THAT THE INFORMATION, OBSERVATIONS, DATA,
STRATEGIC AND DEVELOPMENT PLANS, FINANCIAL CONDITION, BUSINESS PLANS,
CO-DEVELOPER IDENTITIES, BUSINESS RECORDS, CUSTOMER LISTS, CLIENTS AND
SUPPLIERS, PROJECT RECORDS, MARKET REPORTS, EMPLOYEE LISTS AND BUSINESS MANUALS,
POLICIES AND PROCEDURES, INFORMATION RELATING TO PROCESSES, TECHNOLOGIES OF
THEORY AND ALL OTHER INFORMATION THAT MAY BE DISCLOSED OR OBTAINED BY EXECUTIVE
WHILE EMPLOYED BY THE COMPANY AND ITS AFFILIATES CONCERNING THE BUSINESS OR
AFFAIRS OF THE COMPANY OR ANY AFFILIATE (“CONFIDENTIAL INFORMATION”) ARE THE
PROPERTY OF THE COMPANY OR SUCH AFFILIATE. THEREFORE, EXECUTIVE AGREES NOT TO
DISCLOSE, OTHER THAN IN THE COURSE OF EXECUTIVE’S ASSIGNED DUTIES AND FOR THE
BENEFIT OF THE COMPANY, TO ANY UNAUTHORIZED PERSON OR USE FOR EXECUTIVE’S OWN
PURPOSES ANY CONFIDENTIAL INFORMATION WITHOUT THE PRIOR WRITTEN CONSENT OF
COMPANY, UNLESS AND TO THE EXTENT THAT (A) THE AFOREMENTIONED MATTERS BECOME
GENERALLY KNOWN TO AND AVAILABLE FOR USE BY THE PUBLIC OTHER THAN AS A RESULT OF
EXECUTIVE’S (OR ANY REPRESENTATIVE OF EXECUTIVE’S) ACTS OR OMISSIONS OR

 

6

--------------------------------------------------------------------------------

 

EXECUTIVE IS REQUIRED TO DISCLOSE BY APPLICABLE LAW, REGULATION OR LEGAL PROCESS
(PROVIDED THAT EXECUTIVE PROVIDES THE COMPANY WITH PRIOR NOTICE OF THE
CONTEMPLATED DISCLOSURE AND REASONABLY COOPERATES WITH THE COMPANY AT ITS
EXPENSE IN SEEKING A PROTECTIVE ORDER OR OTHER APPROPRIATE PROTECTION OF SUCH
INFORMATION). EXECUTIVE SHALL DELIVER TO THE COMPANY AT THE TERMINATION OF THE
EMPLOYMENT PERIOD, OR AT ANY OTHER TIME THE COMPANY MAY REQUEST, ALL OF THE
PROPERTY OF THE COMPANY THAT EXECUTIVE MAY THEN POSSESS OR HAVE UNDER CONTROL,
INCLUDING ALL MEMORANDA, NOTES, E-MAILS, PLANS, RECORDS, REPORTS, COMPUTER DISKS
OR TAPES, PRINTOUTS, SOFTWARE, COMPUTER ACCESS CODES AND OTHER DOCUMENTS AND
DATA (AND COPIES OR REPRODUCTIONS THEREOF) CONTAINING OR RELATING TO
CONFIDENTIAL INFORMATION, WORK PRODUCT (AS DEFINED BELOW) OR THE BUSINESS OF THE
COMPANY OR ANY AFFILIATE AND ALL COMPUTERS (INCLUDING LAPTOPS), CELL PHONES,
KEYS, PDAS, BLACKBERRIES, CREDIT CARDS, FACSIMILE MACHINES, TELEVISIONS AND CARD
ACCESS KEYS TO ANY COMPANY BUILDING. EXECUTIVE AGREES NOT TO RETAIN ANY COPIES,
DUPLICATES, REPRODUCTIONS OR EXCERPTS OF SUCH MATERIAL OR DOCUMENTS.

 

8.                                       INTELLECTUAL PROPERTY.

 

(A)                                  IN ACCORDANCE WITH UCA §34-39-1 ET SEQ.,
EXECUTIVE ACKNOWLEDGES AND AGREES THAT ALL OF THE FOLLOWING INTELLECTUAL
PROPERTY OR PARTS THEREOF (THE “INTELLECTUAL PROPERTY”), WHETHER PATENTABLE OR
UNPATENTABLE SHALL BELONG EXCLUSIVELY TO THE COMPANY OR AN AFFILIATE (OR THEIR
DESIGNEE), WHETHER OR NOT PATENT APPLICATIONS, TRADEMARK REGISTRATIONS, OR
COPYRIGHT REGISTRATIONS ARE FILED THEREON:

 

(I)                                     INTELLECTUAL PROPERTY, WHETHER IN WHOLE
OR IN PART THAT IS CONCEIVED, DEVELOPED, REDUCED TO PRACTICE, OR CREATED BY
EXECUTIVE, SOLELY OR JOINTLY WITH OTHERS, WITHIN THE SCOPE OF EXECUTIVE’S
EMPLOYMENT, ON THE COMPANY’S OR AN AFFILIATE’S TIME, OR WITH THE AID,
ASSISTANCE, OR USE OF ANY OF THE COMPANY’S OR AN AFFILIATE’S PROPERTY,
FACILITIES, SUPPLIES, RESOURCES, OR INTELLECTUAL PROPERTY. FOR PURPOSES OF THIS
AGREEMENT, “INTELLECTUAL PROPERTY” MEANS ANY AND ALL PATENTS, TRADE SECRETS,
KNOW-HOW, TECHNOLOGY, CONFIDENTIAL INFORMATION, IDEAS, COPYRIGHTS, TRADEMARKS,
AND SERVICE MARKS AND ANY AND ALL RIGHTS, APPLICATIONS, AND REGISTRATIONS
RELATING TO THEM.

 

(II)                                  INTELLECTUAL PROPERTY OR PARTS THEREOF
THAT ARE SUGGESTED BY ANY WORK, SERVICES OR DUTIES PERFORMED BY EXECUTIVE FOR
THE COMPANY OR AN AFFILIATE, EITHER WHILE PERFORMING EXECUTIVE’S DUTIES WITH THE
COMPANY OR AN AFFILIATE OR ON EXECUTIVE’S OWN TIME, BUT ONLY INSOFAR AS THE
INTELLECTUAL PROPERTY IS RELATED TO EXECUTIVE’S WORK AS AN EMPLOYEE OR OTHER
SERVICE PROVIDER TO THE COMPANY OR AN AFFILIATE.

 

(III)                               INTELLECTUAL PROPERTY OR PARTS THEREOF THAT
ARE RELATED TO THE INDUSTRY OR TRADE OF THE COMPANY OR AN AFFILIATE.

 

(IV)                              INTELLECTUAL PROPERTY OR PARTS THEREOF THAT
ARE RELATED TO THE CURRENT OR DEMONSTRABLY ANTICIPATED BUSINESS, RESEARCH, OR
DEVELOPMENT OF THE COMPANY OR AN AFFILIATE.

 

7

--------------------------------------------------------------------------------

 

(B)                                 EXECUTIVE AGREES AND ACKNOWLEDGES THAT ANY
INTELLECTUAL PROPERTY THAT IS WORKED ON, DEVELOPED, OR IN ANY WAY CONCEIVED OF
OR COMMENCED IN ANY WAY DURING THE EMPLOYMENT PERIOD, INCLUDING ANY INTELLECTUAL
PROPERTY DEVELOPED SUBSEQUENT TO THE EMPLOYMENT PERIOD THAT CAN BE REASONABLY
SHOWN TO HAVE EVOLVED FROM OR GERMINATED DURING THE EMPLOYMENT PERIOD SHALL
PRESUMPTIVELY BELONG EXCLUSIVELY TO THE COMPANY OR AN AFFILIATE (OR THEIR
DESIGNEE).

 

(C)                                  EXECUTIVE WILL KEEP FULL AND COMPLETE
WRITTEN RECORDS (THE “RECORDS”), IN THE MANNER PRESCRIBED BY THE COMPANY, OF ALL
INTELLECTUAL PROPERTY, AND WILL PROMPTLY DISCLOSE ALL INTELLECTUAL PROPERTY
COMPLETELY AND IN WRITING TO THE COMPANY. THE RECORDS SHALL BE THE SOLE AND
EXCLUSIVE PROPERTY OF THE COMPANY, AND EXECUTIVE WILL SURRENDER THEM UPON THE
TERMINATION OF THE EMPLOYMENT PERIOD, OR UPON THE COMPANY’S REQUEST. EXECUTIVE
WILL ASSIGN TO THE COMPANY OR AN AFFILIATE THE INTELLECTUAL PROPERTY INCLUDING
ALL PATENTS, TRADEMARKS, AND/OR COPYRIGHTS THAT MAY ISSUE THEREON IN ANY AND ALL
COUNTRIES, WHETHER DURING OR SUBSEQUENT TO THE EMPLOYMENT PERIOD, TOGETHER WITH
THE RIGHT TO FILE, IN EXECUTIVE’S NAME OR IN THE NAME OF THE COMPANY OR AN
AFFILIATE (OR THEIR DESIGNEES), APPLICATIONS FOR PATENTS, TRADEMARKS, AND/OR
COPYRIGHTS AND EQUIVALENT RIGHTS (THE “APPLICATIONS”). EXECUTIVE WILL, AT ANY
TIME DURING AND SUBSEQUENT TO THE EMPLOYMENT PERIOD, MAKE SUCH APPLICATIONS,
SIGN SUCH PAPERS, TAKE ALL RIGHTFUL OATHS, AND PERFORM ALL ACTS AS MAY BE
REQUESTED FROM TIME TO TIME BY THE COMPANY OR AN AFFILIATE WITH RESPECT TO THE
INTELLECTUAL PROPERTY. EXECUTIVE WILL ALSO EXECUTE ASSIGNMENTS TO THE COMPANY OR
AN AFFILIATE (OR THEIR DESIGNEES) OF THE APPLICATIONS, AND GIVE THE COMPANY OR
AN AFFILIATE AND THEIR ATTORNEYS ALL REASONABLE ASSISTANCE (INCLUDING THE GIVING
OF TESTIMONY) TO OBTAIN THE INVENTIONS FOR ITS BENEFIT, ALL WITHOUT ADDITIONAL
COMPENSATION TO EXECUTIVE FROM THE COMPANY OR AN AFFILIATE, BUT ENTIRELY AT THE
COMPANY’S OR AN AFFILIATE’S EXPENSE.

 

(D)                                 IN ADDITION, THE INTELLECTUAL PROPERTY WILL
BE DEEMED WORK FOR HIRE, AS SUCH TERM IS DEFINED UNDER THE COPYRIGHT LAW OF THE
UNITED STATES, ON BEHALF OF THE COMPANY AND ITS AFFILIATES AND EXECUTIVE AGREES
THAT THE COMPANY OR AN AFFILIATE WILL BE THE SOLE OWNER OF THE INTELLECTUAL
PROPERTY, AND ALL UNDERLYING RIGHTS THEREIN, IN ALL MEDIA NOW KNOWN OR
HEREINAFTER DEVISED, THROUGHOUT THE UNIVERSE AND IN PERPETUITY WITHOUT ANY
FURTHER OBLIGATIONS TO EXECUTIVE. IF THE INTELLECTUAL PROPERTY, OR ANY PORTION
THEREOF, IS DEEMED NOT TO BE WORK FOR HIRE, EXECUTIVE HEREBY IRREVOCABLY
CONVEYS, TRANSFERS AND ASSIGNS TO THE COMPANY OR AN AFFILIATE, ALL RIGHTS, IN
ALL MEDIA NOW KNOWN OR HEREINAFTER DEVISED, THROUGHOUT THE UNIVERSE AND IN
PERPETUITY, IN AND TO THE INTELLECTUAL PROPERTY, INCLUDING WITHOUT LIMITATION,
ALL OF EXECUTIVE’S RIGHT, TITLE AND INTEREST IN THE COPYRIGHTS (AND ALL
RENEWALS, REVIVALS AND EXTENSIONS THEREOF) TO THE INTELLECTUAL PROPERTY,
INCLUDING WITHOUT LIMITATION, ALL RIGHTS OF ANY KIND OR ANY NATURE NOW OR
HEREAFTER RECOGNIZED, INCLUDING WITHOUT LIMITATION, THE UNRESTRICTED RIGHT TO
MAKE MODIFICATIONS, ADAPTATIONS AND REVISIONS TO THE INTELLECTUAL PROPERTY, TO
EXPLOIT AND ALLOW OTHERS TO EXPLOIT THE INTELLECTUAL PROPERTY AND ALL RIGHTS TO
SUE AT LAW OR IN EQUITY FOR ANY INFRINGEMENT, OR OTHER UNAUTHORIZED USE OR
CONDUCT IN DEROGATION OF THE INTELLECTUAL PROPERTY, KNOWN OR UNKNOWN, PRIOR TO
THE DATE HEREOF, INCLUDING WITHOUT LIMITATION THE RIGHT TO RECEIVE ALL PROCEEDS
AND DAMAGES THEREFROM. IN ADDITION, EXECUTIVE HEREBY WAIVES ANY SO-CALLED “MORAL
RIGHTS” WITH RESPECT TO THE INTELLECTUAL PROPERTY. EXECUTIVE HEREBY WAIVES ANY
AND ALL CURRENTLY EXISTING AND FUTURE MONETARY RIGHTS IN AND TO THE INTELLECTUAL
PROPERTY AND ALL PATENTS, TRADEMARKS, AND/OR COPYRIGHTS THAT MAY ISSUE THEREON,
INCLUDING, WITHOUT LIMITATION, ANY RIGHTS THAT WOULD OTHERWISE ACCRUE TO
EXECUTIVE’S BENEFIT BY VIRTUE OF EXECUTIVE BEING AN EMPLOYEE OF OR OTHER SERVICE
PROVIDER TO THE COMPANY OR AN AFFILIATE.

 

8

--------------------------------------------------------------------------------

 

(E)                                  FURTHER, EXECUTIVE RECOGNIZES AND
ACKNOWLEDGES THE VALIDITY OF THE COMPANY OR AN AFFILIATE’S RIGHTS IN THE
INTELLECTUAL PROPERTY AND ALL APPLICATIONS AND REGISTRATIONS SECURED AND TO BE
SECURED THEREFORE, AND THAT THE COMPANY OR AN AFFILIATE IS THE OWNER THEREOF.
EXECUTIVE FURTHER AGREES NOT TO CHALLENGE THE VALIDITY OF OR THE COMPANY OR AN
AFFILIATE’S TITLE IN THE INTELLECTUAL PROPERTY AND WILL NOT OPPOSE, PETITION TO
CANCEL, OR REQUEST RE-EXAMINATION OF ANY APPLICATIONS FILED OR ISSUED OR
REGISTRATIONS RECEIVED IN RESPECT OF THE INTELLECTUAL PROPERTY.

 

9.                                       NON-COMPETE, NON-SOLICITATION,
NON-DISPARAGEMENT; COOPERATION.

 

(A)                                  IN FURTHER CONSIDERATION OF THE
COMPENSATION TO BE PAID TO EXECUTIVE HEREUNDER, EXECUTIVE ACKNOWLEDGES THAT IN
THE COURSE OF EXECUTIVE’S EMPLOYMENT WITH THE COMPANY EXECUTIVE SHALL BECOME
FAMILIAR WITH THE COMPANY’S TRADE SECRETS AND WITH OTHER CONFIDENTIAL
INFORMATION CONCERNING THE COMPANY AND AFFILIATES. THEREFORE, EXECUTIVE AGREES
THAT DURING THE EMPLOYMENT PERIOD AND FOR TWO YEARS THEREAFTER (THE “NONCOMPETE
PERIOD”), EXECUTIVE SHALL NOT, WITHOUT THE EXPRESS WRITTEN CONSENT OF THE
COMPANY, DIRECTLY OR INDIRECTLY OWN ANY INTEREST IN, MANAGE, CONTROL,
PARTICIPATE IN, CONSULT WITH, ADVISE, RENDER SERVICES FOR, OR IN ANY MANNER
ENGAGE IN ANY ACTIVITY COMPETING WITH THE BUSINESS OF THE COMPANY OR AFFILIATES
WITHIN ANY GEOGRAPHICAL AREA IN WHICH THE COMPANY OR AFFILIATES ENGAGE OR PLAN
TO ENGAGE IN SUCH BUSINESSES AS OF THE DATE OF THE TERMINATION OF EXECUTIVE’S
EMPLOYMENT. NOTHING HEREIN SHALL PROHIBIT EXECUTIVE FROM BEING A PASSIVE OWNER
OF NOT MORE THAN 1% OF THE OUTSTANDING STOCK OF ANY CLASS OF A CORPORATION THAT
IS PUBLICLY TRADED, SO LONG AS EXECUTIVE HAS NO ACTIVE PARTICIPATION IN THE
BUSINESS OF SUCH CORPORATION.

 

(B)                                 DURING THE NONCOMPETE PERIOD, EXECUTIVE
SHALL NOT, DIRECTLY OR INDIRECTLY, INDIVIDUALLY OR ON BEHALF OF ANY OTHER
PERSON, FIRM CORPORATION OR OTHER ENTITY (I) HIRE ANY PERSON WHO WAS AN
EMPLOYEE, REPRESENTATIVE OR AGENT OF THE COMPANY OR ANY AFFILIATE AT ANY TIME
DURING THE THREE-MONTH PERIOD PRIOR TO THE BEGINNING OF THE NONCOMPETE PERIOD OR
SOLICIT, AID, INDUCE OR ATTEMPT TO INDUCE SUCH AN EMPLOYEE, REPRESENTATIVE OR
AGENT TO TERMINATE ITS RELATIONSHIP WITH THE COMPANY OR AN AFFILIATE OR
(II) SOLICIT, INDUCE OR ATTEMPT TO INDUCE ANY CUSTOMER, SUPPLIER, VENDOR,
LICENSEE, LICENSOR, FRANCHISEE OR OTHER BUSINESS RELATION OF THE COMPANY OR ANY
AFFILIATE TO CEASE DOING BUSINESS WITH THE COMPANY OR SUCH AFFILIATE, OR IN ANY
WAY INTERFERE WITH THE RELATIONSHIP BETWEEN ANY SUCH CUSTOMER, SUPPLIER, VENDOR,
LICENSEE OR BUSINESS RELATION AND THE COMPANY OR ANY AFFILIATE, WHICH
INTERFERENCE MAY REASONABLY BE EXPECTED TO CAUSE MATERIAL MONETARY DAMAGE TO THE
COMPANY OR ITS AFFILIATES.

 

(C)                                  DURING THE EMPLOYMENT PERIOD AND FOR THREE
YEARS THEREAFTER, EXECUTIVE SHALL NOT OR ENCOURAGE OR INDUCE OTHERS TO DO OR SAY
ANYTHING AT ANY TIME THAT DISPARAGES THE COMPANY OR AN AFFILIATE OR ANY OF THE
COMPANY’S OR AN AFFILIATE’S PAST OR PRESENT DIRECTORS, OFFICERS, EMPLOYEES OR
AGENTS OR THEIR PRODUCTS OR SERVICES (THE “COMPANY PARTIES”). FOR PURPOSES OF
THIS AGREEMENT, THE TERM “DISPARAGE” INCLUDES, WITHOUT LIMITATION, COMMENTS OR
STATEMENTS TO THE PRESS AND/OR MEDIA, THE COMPANY PARTIES OR ANY INDIVIDUAL OR
ENTITY WITH WHOM ANY COMPANY PARTY HAS A BUSINESS RELATIONSHIP THAT WOULD
ADVERSELY AFFECT IN ANY MANNER: (I) THE CONDUCT OF THE BUSINESS OF ANY COMPANY
PARTY (INCLUDING, WITHOUT LIMITATION, ANY BUSINESS PLANS OR PROSPECTS); OR
(II) THE BUSINESS REPUTATION OF ANY COMPANY PARTY.

 

(D)                                 UPON THE RECEIPT OF REASONABLE NOTICE FROM
THE COMPANY (INCLUDING OUTSIDE COUNSEL), EXECUTIVE AGREES THAT WHILE EMPLOYED BY
THE COMPANY AND THEREAFTER, EXECUTIVE WILL

 

9

--------------------------------------------------------------------------------

 

RESPOND AND PROVIDE INFORMATION WITH REGARD TO MATTERS IN WHICH EXECUTIVE HAS
KNOWLEDGE AS A RESULT OF EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, AND WILL
PROVIDE REASONABLE ASSISTANCE TO THE COMPANY, ITS AFFILIATES AND THEIR
RESPECTIVE REPRESENTATIVES IN DEFENSE OF ANY CLAIMS THAT MAY BE MADE AGAINST THE
COMPANY OR ITS AFFILIATES, AND WILL ASSIST THE COMPANY AND ITS AFFILIATES IN THE
PROSECUTION OF ANY CLAIMS THAT MAY BE MADE BY THE COMPANY OR ITS AFFILIATES, TO
THE EXTENT THAT SUCH CLAIMS MAY RELATE TO THE PERIOD OF EXECUTIVE’S EMPLOYMENT
WITH THE COMPANY (OR ANY PREDECESSOR). EXECUTIVE AGREES TO PROMPTLY INFORM THE
COMPANY IF EXECUTIVE BECOMES AWARE OF ANY LAWSUITS INVOLVING SUCH CLAIMS THAT
MAY BE FILED OR THREATENED AGAINST THE COMPANY OR ITS AFFILIATES. EXECUTIVE ALSO
AGREES TO PROMPTLY INFORM THE COMPANY (TO THE EXTENT EXECUTIVE IS LEGALLY
PERMITTED TO DO SO) IF EXECUTIVE IS ASKED TO ASSIST IN ANY INVESTIGATION OF THE
COMPANY OR ITS AFFILIATES (OR THEIR ACTIONS), REGARDLESS OF WHETHER A LAWSUIT OR
OTHER PROCEEDING HAS THEN BEEN FILED AGAINST THE COMPANY OR ITS AFFILIATES WITH
RESPECT TO SUCH INVESTIGATION, AND SHALL NOT DO SO UNLESS LEGALLY REQUIRED.

 

10.                                 ENFORCEMENT. IF, AT THE TIME OF ENFORCEMENT
OF PARAGRAPHS 7, 8 OR 9 HEREOF, A COURT HOLDS THAT THE RESTRICTIONS STATED
HEREIN ARE UNREASONABLE UNDER CIRCUMSTANCES THEN EXISTING, THE PARTIES HERETO
AGREE THAT THE MAXIMUM PERIOD, SCOPE OR GEOGRAPHICAL AREA REASONABLE UNDER SUCH
CIRCUMSTANCES SHALL BE SUBSTITUTED FOR THE STATED PERIOD, SCOPE OR AREA. BECAUSE
EXECUTIVE’S SERVICES ARE UNIQUE AND BECAUSE EXECUTIVE HAS ACCESS TO CONFIDENTIAL
INFORMATION AND WORK PRODUCT, THE PARTIES HERETO AGREE THAT MONEY DAMAGES WOULD
NOT BE AN ADEQUATE REMEDY FOR ANY BREACH OF PARAGRAPHS 7, 8 OR 9 HEREOF.
THEREFORE, IN THE EVENT OF A BREACH OR THREATENED BREACH OF PARAGRAPHS 7, 8 OR 9
HEREOF, THE COMPANY OR ITS SUCCESSOR OR ASSIGNS MAY, IN ADDITION TO ALL OTHER
RIGHTS AND REMEDIES EXISTING IN THEIR FAVOR, APPLY TO ANY COURT OF COMPETENT
JURISDICTION FOR SPECIFIC PERFORMANCE AND/OR INJUNCTIVE OR OTHER RELIEF IN ORDER
TO ENFORCE, OR PREVENT ANY VIOLATIONS OF, THE PROVISIONS HEREOF (WITHOUT POSTING
A BOND OR OTHER SECURITY). IN ADDITION, IN THE EVENT OF AN ALLEGED BREACH OR
VIOLATION BY EXECUTIVE OF PARAGRAPH 9 HEREOF, THE NONCOMPETE PERIOD SHALL BE
TOLLED UNTIL SUCH BREACH OR VIOLATION HAS BEEN DULY CURED. EXECUTIVE AGREES THAT
THE RESTRICTIONS CONTAINED IN PARAGRAPH 9 HEREOF ARE REASONABLE.

 

11.                                 OTHER BUSINESSES. AS LONG AS EXECUTIVE IS
EMPLOYED BY THE COMPANY OR AN AFFILIATE, EXECUTIVE SHALL NOT, WITHOUT THE
EXPRESS WRITTEN CONSENT OF THE BOARD, THE CHIEF EXECUTIVE OFFICER OR THE
PRESIDENT, BECOME ENGAGED IN OR RENDER SERVICES FOR, ANY BUSINESS OTHER THAN THE
BUSINESS OF THE COMPANY, ANY AFFILIATE OR ANY CORPORATION OR PARTNERSHIP IN
WHICH THE COMPANY OR AN AFFILIATE HAS AN EQUITY INTEREST; PROVIDED, THAT
EXECUTIVE MAY BE A PASSIVE OWNER OF NOT MORE THAN 1% OF THE EQUITY SECURITIES OF
AN ENTERPRISE ENGAGED IN SUCH BUSINESS, SO LONG AS EXECUTIVE HAS NO ACTIVE
PARTICIPATION IN THE BUSINESS OF SUCH ENTERPRISE, IF SUCH ACTIVITIES DO NOT IN
ANY MATERIAL WAY INTERFERE WITH THE PERFORMANCE BY EXECUTIVE OF EXECUTIVE’S
OBLIGATIONS HEREUNDER AND SUCH ACTIVITIES DO NOT IN ANY WAY MATERIALLY AND
ADVERSELY AFFECT THE COMPANY OR AN AFFILIATE OR CREATE A POTENTIAL BUSINESS
CONFLICT OR THE APPEARANCE THEREOF. IF AT ANY TIME SUCH SERVICES CONFLICT WITH
EXECUTIVE’S FIDUCIARY DUTY TO THE COMPANY OR AN AFFILIATE OR CREATE ANY
APPEARANCE THEREOF, EXECUTIVE SHALL PROMPTLY CEASE PROVIDING SUCH SERVICES AFTER
WRITTEN NOTICE OF THE CONFLICT IS RECEIVED FROM THE COMPANY. EXECUTIVE SHALL
NOTIFY THE COMPANY PRIOR TO ENGAGING IN ANY SUCH ACTIVITIES. NOTHING CONTAINED
IN THIS PARAGRAPH 11 SHALL LIMIT THE PROVISIONS OF PARAGRAPH 9 HEREOF.

 

10

--------------------------------------------------------------------------------

 

12.                                 EXECUTIVE’S REPRESENTATIONS. EXECUTIVE
HEREBY REPRESENTS AND WARRANTS TO THE COMPANY THAT (I) THE EXECUTION, DELIVERY
AND PERFORMANCE OF THIS AGREEMENT BY EXECUTIVE DO NOT AND SHALL NOT CONFLICT
WITH, BREACH, VIOLATE OR CAUSE A DEFAULT UNDER ANY CONTRACT, AGREEMENT,
INSTRUMENT, ORDER, JUDGMENT OR DECREE TO WHICH EXECUTIVE IS A PARTY OR BY WHICH
EXECUTIVE IS BOUND, (II) EXECUTIVE IS NOT A PARTY TO OR BOUND BY ANY EMPLOYMENT
AGREEMENT, NONCOMPETE AGREEMENT OR CONFIDENTIALITY AGREEMENT WITH ANY OTHER
PERSON OR ENTITY AND (III) UPON THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY
THE COMPANY, THIS AGREEMENT SHALL BE THE VALID AND BINDING OBLIGATION OF
EXECUTIVE, ENFORCEABLE IN ACCORDANCE WITH ITS TERMS. EXECUTIVE HEREBY
ACKNOWLEDGES AND REPRESENTS THAT FULL UNDERSTANDING OF THE TERMS AND CONDITIONS
CONTAINED HEREIN.

 

13.                                 SURVIVAL. PARAGRAPHS 7, 8 AND 9 AND
PARAGRAPHS 13 THROUGH 21 SHALL SURVIVE AND CONTINUE IN FULL FORCE IN ACCORDANCE
WITH THEIR TERMS NOTWITHSTANDING ANY TERMINATION OF THE EMPLOYMENT PERIOD.

 

14.                                 NOTICES. ANY NOTICE PROVIDED FOR IN THIS
AGREEMENT SHALL BE IN WRITING AND SHALL BE DELIVERED, EITHER PERSONALLY OR BY
REPUTABLE OVERNIGHT COURIER SERVICE OR MAILED POSTPAID BY FIRST CLASS MAIL,
RETURN RECEIPT REQUESTED, TO THE RECIPIENT AT THE ADDRESS BELOW INDICATED:

 

Notices to Executive

 

Notices to the Company

 

 

 

At the address shown

 

66 E. Wadsworth Park Drive

on the records of the Company

 

Draper, UT 84020

 

 

Attn: General Counsel

 

Or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice given pursuant to this Agreement shall be deemed to have been given when
so delivered or mailed.

 

15.                                 SEVERABILITY. WHENEVER POSSIBLE, EACH
PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER AS TO BE
EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT
IS HELD TO BE INVALID, ILLEGAL OR UNENFORCEABLE IN ANY RESPECT UNDER ANY
APPLICABLE LAW OR RULE IN ANY JURISDICTION, SUCH INVALIDITY, ILLEGALITY OR
UNENFORCEABILITY SHALL NOT AFFECT ANY OTHER PROVISION OR ANY OTHER JURISDICTION,
BUT THIS AGREEMENT SHALL BE REFORMED, CONSTRUED AND ENFORCED IN SUCH
JURISDICTION AS IF SUCH INVALID, ILLEGAL OR UNENFORCEABLE PROVISION HAD NEVER
BEEN CONTAINED HEREIN

 

16.                                 COMPLETE AGREEMENT. THIS AGREEMENT, THOSE
DOCUMENTS EXPRESSLY REFERRED TO HEREIN AND OTHER DOCUMENTS OF EVEN DATE HEREWITH
AND THE EMBODY THE COMPLETE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND
SUPERSEDE AND PREEMPT ANY PRIOR UNDERSTANDINGS, AGREEMENTS OR REPRESENTATIONS BY
OR AMONG THE PARTIES, WRITTEN OR ORAL, THAT MAY HAVE RELATED TO THE SUBJECT
MATTER HEREOF IN ANY WAY (INCLUDING, WITHOUT LIMITATION, THE EMPLOYMENT
AGREEMENT BETWEEN EXECUTIVE AND THE COMPANY DATED AS OF FEBRUARY 9, 2002).
NOTWITHSTANDING THE FOREGOING, EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE
RESTRICTIONS CONTAINED IN PARAGRAPHS 7, 8 AND 9 HEREOF ARE IN ADDITION TO, AND
NOT IN LIEU OF, ANY OTHER COMPANY-IMPOSED LIMITATION ON EXECUTIVE’S ACTIVITIES
OR RIGHTS DURING THE EMPLOYMENT PERIOD AND THEREAFTER.

 

11

--------------------------------------------------------------------------------

 

17.                                 NO STRICT CONSTRUCTION. THE LANGUAGE USED IN
THIS AGREEMENT SHALL BE DEEMED TO BE THE LANGUAGE CHOSEN BY THE PARTIES HERETO
TO EXPRESS THEIR MUTUAL INTENT, AND NO RULE OF STRICT CONSTRUCTION SHALL BE
APPLIED AGAINST EITHER PARTY.

 

18.                                 COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED
IN SEPARATE COUNTERPARTS, EACH OF WHICH IS DEEMED TO BE AN ORIGINAL AND ALL OF
WHICH TAKEN TOGETHER CONSTITUTE ONE AND THE SAME AGREEMENT.

 

19.                                 SUCCESSORS AND ASSIGNS. THIS AGREEMENT IS
PERSONAL TO EACH OF THE PARTIES HERETO. EXCEPT AS PROVIDED IN THIS PARAGRAPH 19,
NO PARTY MAY ASSIGN OR DELEGATE ANY RIGHTS OR OBLIGATIONS HEREUNDER. THE COMPANY
MAY ASSIGN THIS AGREEMENT TO A PERSON OR ENTITY THAT IS AN AFFILIATE OR
SUCCESSOR AND SHALL REQUIRE ANY SUCCESSOR (WHETHER DIRECT OR INDIRECT, BY
PURCHASE, MERGER, CONSOLIDATION OR OTHERWISE) TO ALL OR SUBSTANTIALLY ALL OF THE
BUSINESS AND/OR ASSETS OF (I) THE COMPANY, (II) ANY AFFILIATE TO WHICH THIS
AGREEMENT HAS BEEN ASSIGNED OR (III) ANY DIVISION OF THE COMPANY OR AFFILIATE BY
WHICH EXECUTIVE IS EMPLOYED TO EXPRESSLY ASSUME AND AGREE TO PERFORM THIS
AGREEMENT IN THE SAME MANNER AND TO THE SAME EXTENT THAT THE COMPANY WOULD BE
REQUIRED TO PERFORM IT IF NO SUCH SUCCESSION HAD TAKEN PLACE. AS USED IN THIS
AGREEMENT, “COMPANY” SHALL MEAN THE COMPANY, ANY AFFILIATE TO WHICH THIS
AGREEMENT HAS BEEN ASSIGNED AND ANY SUCCESSOR TO THE BUSINESS AND/OR ASSETS OF
(I) THE COMPANY, (II) ANY AFFILIATE TO WHICH THIS AGREEMENT HAS BEEN ASSIGNED OR
(III) ANY DIVISION OF THE COMPANY OR AFFILIATE BY WHICH EXECUTIVE IS EMPLOYED
WHICH ASSUMES AND AGREES TO PERFORM THIS AGREEMENT BY OPERATION OF LAW, OR
OTHERWISE.

 

20.                                 CHOICE OF LAW. ALL ISSUES AND QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF UTAH, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF UTAH OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF UTAH.

 

21.                                 AMENDMENT AND WAIVER. THE PROVISIONS OF THIS
AGREEMENT MAY BE AMENDED OR WAIVED ONLY WITH THE PRIOR WRITTEN CONSENT OF THE
COMPANY AND EXECUTIVE BY A DOCUMENT THAT EXPLICITLY STATES ITS INTENTION TO
AMEND THIS AGREEMENT, AND NO COURSE OF CONDUCT OR FAILURE OR DELAY IN ENFORCING
THE PROVISIONS OF THIS AGREEMENT SHALL AFFECT THE VALIDITY, BINDING EFFECT OR
ENFORCEABILITY OF THIS AGREEMENT

 

22.                                 INDEMNIFICATION; LIABILITY INSURANCE.
EXECUTIVE’S RIGHT TO BE INDEMNIFIED FOR ANY ACTIONS, SUITS, PROCEEDINGS, CLAIMS,
DEMANDS, JUDGMENTS, COSTS, EXPENSES (INCLUDING REASONABLE ATTORNEY’S FEES),
LOSSES, AND DAMAGES RESULTING FROM EXECUTIVE’S GOOD FAITH PERFORMANCE OF HIS
DUTIES AND OBLIGATIONS WITH THE COMPANY AND EXECUTIVE’S RIGHT TO BE COVERED
UNDER DIRECTORS AND OFFICERS LIABILITY INSURANCE, EACH TO THE EXTENT PROVIDED IN
THE BY-LAWS OR OTHER ORGANIZATIONAL DOCUMENT OF THE COMPANY, SHALL SURVIVE THE
TERMINATION OF EXECUTIVE’S EMPLOYMENT WITH THE COMPANY WHILE POTENTIAL LIABILITY
EXISTS.

 

12

--------------------------------------------------------------------------------

 

23.                                 NO MITIGATION. IN NO EVENT SHALL EXECUTIVE
BE OBLIGED TO SEEK OTHER EMPLOYMENT OR TAKE ANY OTHER ACTION BY WAY OF
MITIGATION OF THE AMOUNTS PAYABLE TO EXECUTIVE UNDER ANY OF THE PROVISIONS OF
THIS AGREEMENT, NOR SHALL THE AMOUNT OF ANY PAYMENT HEREUNDER BE REDUCED BY ANY
COMPENSATION EARNED BY EXECUTIVE AS A RESULT OF EMPLOYMENT BY ANOTHER EMPLOYER.

 

24.                                 ARBITRATION. ANY DISPUTE OR CONTROVERSY
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR EXECUTIVE’S EMPLOYMENT
WITH THE COMPANY, OTHER THAN INJUNCTIVE RELIEF UNDER PARAGRAPH 10 HEREOF, SHALL
BE SETTLED EXCLUSIVELY BY ARBITRATION, CONDUCTED BEFORE A SINGLE ARBITRATOR IN
SALT LAKE CITY, UTAH (APPLYING UTAH LAW) IN ACCORDANCE WITH THE NATIONAL
RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES OF THE AMERICAN ARBITRATION
ASSOCIATION THEN IN EFFECT. THE DECISION OF THE ARBITRATOR WILL BE FINAL AND
BINDING UPON THE PARTIES HERETO. JUDGMENT MAY BE ENTERED ON THE ARBITRATOR’S
AWARD IN ANY COURT HAVING JURISDICTION. THE PARTIES ACKNOWLEDGE AND AGREE THAT
IN CONNECTION WITH ANY SUCH ARBITRATION AND REGARDLESS OF OUTCOME (A) EACH PARTY
SHALL PAY ALL ITS OWN COSTS AND EXPENSES, INCLUDING WITHOUT LIMITATION ITS OWN
LEGAL FEES AND EXPENSES, AND (B) JOINT EXPENSES SHALL BE BORNE EQUALLY AMONG THE
PARTIES. FOLLOWING A CHANGE OF OWNERSHIP OR EFFECTIVE CONTROL COVERED BY
SECTION 280G(B)(2) OF THE CODE, IN THE EVENT OF ANY DISPUTE ARISING OUT OF OR
UNDER THIS AGREEMENT OR EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, IF THE
ARBITRATOR DETERMINES THAT EXECUTIVE HAS PREVAILED ON THE ISSUES IN THE
ARBITRATION, THE COMPANY SHALL, UPON PRESENTMENT OF APPROPRIATE DOCUMENTATION,
PROMPTLY, AT EXECUTIVE’S ELECTION, PAY OR REIMBURSE EXECUTIVE FOR ALL REASONABLE
LEGAL AND OTHER PROFESSIONAL FEES, COSTS OF ARBITRATION AND OTHER EXPENSES
INCURRED IN CONNECTION THEREWITH BY EXECUTIVE.

 

25.                                 WITHHOLDING. THE COMPANY MAY WITHHOLD FROM
ANY AND ALL 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.

 

26.                                 SECTION 409A OF THE CODE. THIS AGREEMENT IS
INTENDED TO COMPLY WITH THE APPLICABLE REQUIREMENTS OF SECTION 409A AND SHALL BE
LIMITED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH SUCH INTENT. TO THE EXTENT
THAT PAYMENT OR BENEFIT HEREUNDER IS SUBJECT TO SECTION 409A, IT IS INTENDED
THAT IT BE PAID IN A MANNER THAT WILL COMPLY WITH SECTION 409A, INCLUDING
PROPOSED, TEMPORARY OR FINAL REGULATIONS OR ANY OTHER GUIDANCE ISSUED BY THE
SECRETARY OF THE TREASURY AND THE INTERNAL REVENUE SERVICE WITH RESPECT THERETO.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, ANY PROVISION IN THIS AGREEMENT
THAT IS INCONSISTENT WITH SECTION 409A SHALL BE DEEMED TO BE AMENDED TO COMPLY
WITH SECTION 409A AND TO THE EXTENT SUCH PROVISION CANNOT BE AMENDED TO COMPLY
THEREWITH, SUCH PROVISION SHALL BE NULL AND VOID. NOTWITHSTANDING THE FOREGOING,
THE COMPANY SHALL HAVE NO LIABILITY TO EXECUTIVE OR OTHERWISE IF ANY AMOUNTS
PAID OR PAYABLE ARE SUBJECT TO SECTION 409A; PROVIDED, HOWEVER, THAT FOLLOWING A
CHANGE OF OWNERSHIP OR EFFECTIVE CONTROL COVERED BY SECTION 280G(B)(2) OF THE
CODE, THE COMPANY SHALL INDEMNIFY AND HOLD EXECUTIVE HARMLESS, ON AN AFTER-TAX
BASIS, FOR ANY ADDITIONAL TAX (INCLUDING INTEREST AND PENALTIES WITH RESPECT
THERETO) IMPOSED ON EXECUTIVE AS A RESULT OF SECTION 409A OF THE CODE.

 

[Signature Page to Follow]

 

13

--------------------------------------------------------------------------------

 

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

 

EXECUTIVE

1-800 CONTACTS, INC.

 

 

 

 

 /s/ Jonathan Coon

 

/s/ Brian W. Bethers

 

Jonathan Coon

Brian W. Bethers, President

 

 

Dated:

 

 

Dated:

 

 

 

14

--------------------------------------------------------------------------------

 

EXHIBIT A

 

Form Release

 

--------------------------------------------------------------------------------

 

EXHIBIT B

 

Gross-Up Provisions

 

(a)                                  In the event that Executive shall become
entitled to payments and/or benefits provided by this Agreement or any other
amounts in the “nature of compensation” (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a change of ownership or effective control
covered by Section 280G(b)(2) of the Code or any person affiliated with the
Company or such person) as a result of such change in ownership or effective
control (collectively the “Company Payments”), and such Company Payments will be
subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (and
any similar tax that may hereafter be imposed by any taxing authority) the
Company shall pay to Executive an additional amount (the “Gross-Up Payment”)
such that the net amount retained by Executive, after deduction of any Excise
Tax on the Company Payments and any U.S. federal, state, and for local income or
payroll tax upon the Gross-up Payment provided for by this paragraph (a), but
before deduction for any U.S. federal, state, and local income or payroll tax on
the Company Payments, shall be equal to the Company Payments.

 

Notwithstanding the foregoing, if it shall be determined that Executive is
entitled to a Gross-Up Payment, but that if the Company Payments are reduced by
the amount necessary such that the receipt of the Company Payments would not
give rise to any Excise Tax (the “Reduced Payment”) and the Reduced Payment
would not be less than 90.0% of the Company Payments, then no Gross-Up Payment
shall be made to Executive and the Company Payments, in the aggregate, shall be
reduced to the Reduced Payments. If the Reduced Payments is to be effective,
payments shall be reduced in the following order (1) acceleration of vesting of
any stock options for which the exercise price exceeds the then fair market
value, (2) any cash severance based on a multiple of Base Salary or Bonus,
(3) any other cash amounts payable to Executive, (4) any benefits valued as
parachute payments; and (5) acceleration of vesting of any equity not covered by
(1) above, unless Executive elects another method of reduction by written notice
to the Company.

 

In the event that the Internal Revenue Service or court ultimately makes a
determination that the excess parachute payments plus the base amount is an
amount other than as determined initially, an appropriate adjustment shall be
made with regard to the Gross-Up Payment or Reduced Payment, as applicable to
reflect the final determination and the resulting impact on whether the
preceding paragraph applies.

 

(b)                                 For purposes of determining whether any of
the Company Payments and Gross-up Payments (collectively the “Total Payments”)
will be subject to the Excise Tax and the amount of such Excise Tax, (x) the
Total Payments shall be treated as “parachute payments” within the meaning of
Section 280G(b)(2) of the Code, and all “parachute payments” in excess of the
“base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless and except to the extent that, in the
determination of the Company’s independent certified public accountants or tax
counsel selected by such accountants or the Company (the “Accountants”) such
Total Payments (in whole or in part) either do not constitute “parachute
payments,” including giving effect to the recalculation of stock options in
accordance

 

--------------------------------------------------------------------------------

 

with Treasury Regulation Section 1.280G-1, Q&A 33, represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the “base amount” or are otherwise
not subject to the Excise Tax, and (y) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Accountants in accordance
with the principles of Section 280G of the Code. To the extent permitted under
Revenue Procedure 2003-68, the value determination shall be recalculated to the
extent it would be beneficial to the Company. The determination of the
Accountants shall be final and binding upon the Company and Executive, except to
the extent provided herein with regard to Internal Revenue Service
determinations. The Company shall be responsible for all charges of the
Accountants..

 

(c)                                  In the event that the Excise Tax is
subsequently determined by the Accountants to be less than the amount taken into
account hereunder at the time the Gross-up Payment is made, Executive shall
repay to the Company, within five days of when the amount of such reduction in
Excise Tax is finally determined, the portion of the prior Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up Payment
attributable to the Excise Tax and U.S. federal, state and local income tax
imposed on the portion of the Gross-up Payment being repaid by Executive if such
repayment results in a reduction in Excise Tax or a U.S. federal, state and
local income tax deduction). The Company shall be responsible for all charges of
the Accountant.

 

In the event that the Excise Tax is later determined by the Accountant or the
Internal Revenue Service to exceed the amount taken into account hereunder at
the time the Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-up
Payment), the Company shall make an additional Gross-up Payment in respect of
such excess (plus any interest or penalties payable with respect to such excess)
at the time that the amount of such excess is finally determined.

 

(d)                                 The Gross-up Payment or portion thereof
provided for in subsection (c) above shall be paid not later than the thirtieth
(30th) day following an event occurring which subjects Executive to the Excise
Tax; provided, however, that if the amount of such Gross-up Payment or portion
thereof cannot be finally determined on or before such day, the Company shall
pay to Executive on such day an estimate, as determined in good faith by the
Accountant, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code), subject to further payments pursuant to
subsection (c) hereof, as soon as the amount thereof can reasonably be
determined, but in no event later than the ninetieth day after the occurrence of
the event subjecting Executive to the Excise Tax. In the event that the amount
of the estimated payments exceeds the amount subsequently determined to have
been due, such excess shall constitute an advance by the Company to Executive,
payable on the fifth day after demand by the Company.

 

(e)                                  In the event of any controversy with the
Internal Revenue Service (or other taxing authority) with regard to the Excise
Tax, Executive shall permit the Company to control issues related to the Excise
Tax (at its expense). In the event of any conference with any taxing authority
as to the Excise Tax or associated income taxes, Executive shall permit the

 

2

--------------------------------------------------------------------------------

 

representative of the Company to accompany Executive, and Executive and
Executive’s representative shall cooperate with the Company and its
representative.

 

(f)                                    Executive shall promptly deliver to the
Company copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax covered by
this provision.

 

(g)                                 Nothing in this Section is intended to
violate the Sarbanes-Oxley Act and to the extent that any advance or repayment
obligation hereunder would do so, such obligation shall be modified so as to
make the advance a nonrefundable payment to you and the repayment obligation
null and void.

 

3

--------------------------------------------------------------------------------