written, which could reasonably be expected by Executive to injure the Company’s business,financial condition, results of operations, prospects, interests or reputation.(c) Executive agrees to comply at all times during the Employment Term with all applicablepolicies, rules, codes and regulations of the Company in effect from time to time, including,without limitation, all applicable codes of ethics or conduct and all policies regardingtrading in the Company’s common stock.**4.** **COMPENSATION AND BENEFITS.**(a) BASE SALARY. During the Employment Term, the Company shall pay Executive a base salary atthe annual rate of $236,900, or such higher rate as may be determined from time to time by theBoard of Directors or a duly authorized committee thereof (such amount, as increased from timeto time, the “Base Salary”). Such Base Salary shall be paid on the Company’s regular pay daysin accordance with the Company’s standard payroll practice for executive officers, subjectonly to such payroll and withholding deductions as may be required by law and other deductionsapplied generally to employees of the Company for insurance and other employee benefit plans.For all purposes under this Agreement, Executive’s Base Salary shall include any amount whichis deferred under any nonqualified plan or arrangement of the Company.(b) INCENTIVE COMPENSATION. (i) ANNUAL CASH BONUS. In addition to the Base Salary, Executive shall be eligiblefor an annual cash bonus (either pursuant to a bonus or incentive plan or program ofthe Company or otherwise) for each fiscal year during the Employment Term. Executive’starget annual cash bonus will be equal to 60% (the “Target Bonus Rate”) of his BaseSalary in effect at the beginning of the relevant fiscal year. The amount of theannual cash bonus, which may be higher or lower than the Target Bonus Rate, shall bedetermined by the Board of Directors or a duly authorized committee thereof based uponapplicable corporate and individual performance targets established by the Board ofDirectors or such committee in its sole discretion (the “Annual Bonus”). For allpurposes under this Agreement, Executive’s Annual Bonus shall include any amount whichis deferred under any nonqualified plan or arrangement of the Company. (ii) LONG-TERM OR SUPPLEMENTAL INCENTIVE COMPENSATION. Executive shall be eligibleto participate in any supplemental and/or long-term incentive compensation plans orprograms (which may consist of stock options, restricted stock, long-term cash awardsor other forms of long-term or supplemental incentive compensation) generally madeavailable to full-time senior executive officers of the Company.(c) BENEFIT PLANS. Executive shall be eligible to participate in and receive benefits under allretirement, health and welfare benefit plans, programs and arrangements which are
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  from time to time available to full-time senior executive officers of the Company inaccordance with the terms and conditions of such plans, programs and arrangements in effectfrom time to time. Such benefit plans, programs and arrangements will include familymedical, family dental and family vision benefit plans and short-term and long-termdisability plans, and may include, without limitation, life insurance plans, accidentaldeath insurance plans, travel accident insurance plans, savings and retirement plans andpension plans (all such benefit plans, the “Benefit Plans”). At his option, Executive maypay directly the premiums for coverage under the above-mentioned disability plans and havethe Company pay to him, as additional income, an amount equal to the amount of thosepremiums. Executive agrees to submit to a physical examination from time to time asrequested by the Company to facilitate Executive’s participation in one or more BenefitPlans. The Company may terminate or reduce benefits under any such plans, programs orarrangements to the extent such reductions apply uniformly to all full-time senior executiveofficers of the Company, and Executive’s benefits shall be reduced or terminatedaccordingly. The Company’s obligations under this Section 4(c) are expressly conditioned onExecutive and his family dependents taking all reasonable actions (including but not limitedto enrolling in all health and welfare benefit programs, plans and arrangements which arefrom time to time available to the Company’s full-time senior executive officers as and whenExecutive and his family dependents become eligible to participate in such programs, plansand arrangements) and providing all information as the Company shall reasonably request andas is necessary for the Company to fulfill such obligations.(d) VACATION. In addition to normal statutory holidays recognized by the Company, Executive shallbe entitled to the greater of (a) four weeks of paid vacation for each fiscal year during theEmployment Term and (b) such other amount of paid vacation as may be afforded executiveofficers under the Company’s policies in effect from time to time (“Vacation Time”).(e) EXPENSE REIMBURSEMENT. The Company shall promptly reimburse Executive for travel and otherout-of-pocket expenses incident to his position in accordance with the Company’s customarypractices applicable to full-time senior executive officers. To the extent that these expensereimbursements are reportable as taxable income, they will be grossed up to include the taxdue on them.(f) FRINGE BENEFITS AND PERQUISITES. Executive shall be eligible to participate in and receivebenefits under all fringe benefit plans, practices, policies and programs of the Company tothe same extent, and subject to the same terms and conditions, as those arrangements are madeavailable to full-time senior executive officers of the Company.**5.** **TERMINATION OF EMPLOYMENT.**Executive’s employment under this Agreement may be terminated under any of the circumstances setforth in this Section 5. Upon termination, Executive (or his beneficiaries or
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estate as the case may be) shall be entitled to receive the compensation and benefits described inSection 6 and, if applicable, Section 7 below.(a) DEATH. Executive’s employment hereunder shall terminate automatically upon Executive’sdeath.(b) TOTAL DISABILITY. The Company may terminate Executive’s employment hereunder, by writtennotice to Executive delivered in accordance with Sections 5(g) and 16 hereof, upon adetermination pursuant to this Section 5(b) that Executive is “Totally Disabled.” Forpurposes of this Agreement, For the purposes of this provision, “Totally Disabled” shall havethe same meaning as it has under the long-term disability policy covering Executive pursuantto paragraph 4(c) herein. Executive’s receipt of disability benefits under the Company’slong-term disability plan shall be deemed conclusive evidence of Total Disability for purposesof this Agreement.(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may terminate Executive’s employmenthereunder for “Cause” at any time, by written notice to Executive delivered in accordance withSections 5(g) and 15 hereof. (i) For purposes of this Agreement, the term “Cause” shall mean any of thefollowing: (A) conviction of a crime (including conviction on a nolo contendre plea)involving the commission by Executive of a felony or of a misdemeanor involving, in thegood faith judgment of the Board of Directors, fraud, dishonesty or moral turpitude;(B) Executive’s deliberate and continual refusal to perform the duties andresponsibilities assigned to Executive under this Agreement (other than as a result ofvacation permitted under this Agreement, sickness, illness or injury); (C) fraud orembezzlement by Executive, determined in accordance with the Company’s normal, internalinvestigative procedures consistently applied; (D) gross misconduct or gross negligenceby Executive in connection with the business of the Company or an Affiliate (as definedherein) unless Executive reasonably believed, in good faith, that his acts or omissionswere in or not opposed to the best interests of the Company (without intent ofExecutive to gain therefrom, directly or indirectly, a profit to which he was notlegally entitled); or (E) any material breach by Executive of any of the provisions ofSection 8 of this Agreement or of any provisions of the Confidentiality and ProprietaryInformation Agreement (as defined herein); provided, however, that the occurrence of anact or omission covered by clauses (B), (D) or (E) of this paragraph 5(c)(i) shall notconstitute “Cause” if Executive remedies such act or omission within ten (10) businessdays after delivery by the Company of written notice to Executive in accordance withSection 15 hereof specifying in reasonable detail the facts and circumstances believedby the Company to constitute such “Cause.” (ii) Any determination of Cause under this Agreement shall be made by resolutionduly adopted by the affirmative vote of at least two-thirds of the members of the
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   Board of Directors (not including Executive if Executive is a member of the Board ofDirectors) at a meeting of the Board of Directors called and held for that purpose;provided that Executive shall have been given written notice of such meeting bycertified mail at least ten (10) business days prior to the meeting and shall havebeen given the opportunity to be heard by the Board of Directors before suchresolution is passed. The failure by the Company to follow the procedures set forthin this Section 5(c)(ii) shall result in the termination of the Executive’semployment being deemed to be a termination by the Company without Cause.(d) TERMINATION BY EXECUTIVE FOR GOOD REASON. Executive may terminate his employment hereunderfor Good Reason after delivery by Executive of written notice to the Company in accordancewith Sections 5(g) and 15 hereof within sixty (60) days after the occurrence of a Good ReasonEvent (as hereinafter defined). For purposes of this Agreement, “Good Reason” means theoccurrence of any of the following events (each a “Good Reason Event”) without Executive’swritten consent during the Employment Term: (i) A change in Executive’s responsibilities or titles or any other action by theCompany which represents a material diminution of Executive’s position, status orauthority, except in connection with or as a result of the termination of Executive’semployment pursuant to any provision of this Section 5 (a “Dimunition”); provided,however that such Dimunition shall not constitute “Good Reason” or a “Good ReasonEvent” if the Company remedies such Dimunition within ten (10) business days afterdelivery by Executive of written notice to the Company in accordance with Section 15hereof specifying in reasonable detail the facts and circumstances believed byExecutive to constitute such Dimunition.  (ii) A reduction by the Company in Executive’s Base Salary.  (iii) A material breach by the Company of Section 4(c) hereof; provided, howeverthat such a breach shall not constitute “Good Reason” or a “Good Reason Event” if theCompany remedies such breach within ten (10) business days after delivery by Executiveof written notice to the Company in accordance with Section 15 hereof specifying inreasonable detail the facts and circumstances believed by Executive to constitute amaterial breach of Section 4(c).  (iv) The failure by the Company to pay Executive any material amount of his BaseSalary, or any material amount of other compensation, that is due and payable underthis Agreement within ten (10) business days after Executive makes written demand forsuch amount. (v) The failure by the Company to enter into a written agreement with any entitythat purchases all or substantially all of the assets of the Company or any entity intowhich the Company is merged (each a “Successor”) pursuant to which such
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   Successor agrees to assume all of the obligations of the Company under thisAgreement at and effective as of the closing of such sale of assets or merger.(e) VOLUNTARY TERMINATION BY EXECUTIVE. Executive may terminate his employment hereunder withoutGood Reason at any time during the Employment Term after providing thirty (30) days’ writtennotice to the Company delivered in accordance with Sections 5(g) and 15 hereof.(f) TERMINATION BY THE COMPANY WITHOUT CAUSE. At any time during the Employment Term, theCompany may terminate Executive’s employment hereunder without Cause by written notice toExecutive delivered in accordance with Sections 5(g) and 15 hereof. For purposes of thisAgreement, Executive’s employment will be deemed to have been terminated “Without Cause” ifExecutive is terminated by the Company for any reason other than Death pursuant to Section5(a), Total Disability pursuant to Section 5(b), or Cause pursuant to Section 5(c).(g) NOTICE OF TERMINATION. Any termination of Executive’s employment by the Company for Causepursuant to Section 5(c), without Cause pursuant to Section 5(f), or as a result ofExecutive’s Total Disability pursuant to Section 5(b), or by Executive for Good Reasonpursuant to Section 5(d), shall be communicated by Notice of Termination to the other partyhereto given in accordance with this Agreement. For purposes of this Agreement, a “Notice ofTermination” means a written notice which (i) indicates the specific termination provision inthis Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstancesclaimed to provide a basis for termination of Executive’s employment under the provision soindicated, and (iii) specifies the effective date of termination, if such date is other thanthe date of receipt of such notice (which effective date shall not be (A) less than ten (10)business days after the giving of such notice in the case of termination by Executive for GoodReason or (B) more than 15 days after the giving of such notice in all other cases). Anyvoluntary termination of Executive’s employment by Executive pursuant to Section 5(e) shall becommunicated by written notice to the Company specifying (i) that Executive wishes toterminate his employment with the Company pursuant to Section 5(e) hereof and (ii) indicatingthe effective date of termination (which effective date shall not be less than 30 days afterthe giving of such notice).**6.** **COMPENSATION AND BENEFITS FOLLOWING TERMINATION OF EMPLOYMENT.**In the event that Executive’s employment hereunder is terminated, Executive shall be entitled tothe following compensation and benefits upon such termination:(a) COMPENSATION AND BENEFITS PAYABLE FOLLOWING TERMINATION FOR ANY REASON. The followingcompensation and benefits shall be payable upon termination of Executive’s employment underthis Agreement for any reason:
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 (i) Executive or his beneficiaries or estate shall be entitled to receive, withinfourteen (14) days after the effective date of termination, any accrued but unpaid BaseSalary for services rendered by Executive to the Company prior to the date oftermination, any accrued but unpaid expenses required to be reimbursed under thisAgreement, and cash compensation (at a rate per day equal to the Base Salary divided bythe number of business days in the relevant year) for any accrued Vacation Time thatremained unused by the Executive at the time of termination; and (ii) Any earned benefits to which Executive (or his beneficiaries or estate) may beentitled pursuant to the plans, policies and arrangements referred to in Sections 4(b),4(c) and 4(g) hereof shall be determined and paid in accordance with the terms of suchplans, policies and arrangements. In the case of compensation previously deferred byExecutive, all amounts previously deferred and not yet paid by the Company shall bepaid to Executive (or his beneficiaries or estate) within fourteen (14) days after theeffective date of termination unless such payment is inconsistent with the terms of anypayment election made by Executive with respect to such deferred compensation.(b) TERMINATION BY REASON OF DEATH. In the event that Executive’s employment is terminated byreason of Executive’s death, the Company shall pay Executive’s estate the followingcompensation and benefits in addition to the compensation and benefits provided for in Section6(a) above: (i) Executive’s estate shall be entitled to be paid: (A) Executive’s Base Salary at the rate in effect immediately priorto Executive’s date of death on the Company’s regular pay days for a period oftwo (2) years from the effective date of termination as if his employment hadcontinued until the end of such two (2)-year period; and (B) an aggregate amount equal to two (2) times the average of theAnnual Bonuses paid to Executive in the two (2) most recently completed fiscalyears preceding the effective date of termination**,**without regard to whetherthe payment of all or any portion of such Annual Bonus has been deferred (suchaverage being hereinafter referred to as the “Bonus Average”), which shall bepaid in equal installments on the Company’s regular pay days over the course oftwenty-four (24) months from the effective date of termination; provided,however, that if at the time of termination Executive has not been employed bythe Company for two fiscal years, the Bonus Average shall be deemed for allpurposes of this Agreement to equal Executive’s Target Bonus Rate multiplied byhis Base Salary at the rate in effect immediately prior to the effective dateof termination. The Company may purchase insurance to cover all or any part ofthe obligations set forth in this Section 6(b)(i) and Executive agrees tosubmit to a physical examination from time to time to facilitate the
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   procurement or renewal of such insurance. Any proceeds of such insurancepaid to Executive or his beneficiaries or estate shall be considered aportion of the payments required to be made to Executive pursuant to thisSection 6(b)(i) and shall not be in addition thereto. (ii) Executive’s dependents shall be entitled to continue to receive medical, dentaland vision insurance coverage at least equal in type and amount to that made availableto dependents of full-time senior executives of the Company immediately prior toExecutive’s death for a period of two (2) years from the effective date of termination,or until Executive’s dependents become eligible for substantially equivalentemployer-provided health insurance benefits from any other person or business entity,whichever occurs first. In the event that participation in any such plan, program orarrangement of the Company is prohibited, the Company will arrange to provide benefitssubstantially similar to those benefits which Executive’s dependents would have beenentitled to receive under such plan, program or arrangement for such period. (iii) All of Executive’s then outstanding options to purchase shares of theCompany’s common stock shall be vested and exercisable in accordance with the terms ofthe stock option plan of the Company pursuant to which such options were granted (the“Governing Stock Option Plan”) as then in effect.(c) TERMINATION BY REASON OF TOTAL DISABILITY. In the event that Executive’s employment isterminated by reason of Executive’s Total Disability pursuant to Section 5(b) hereof, theCompany shall pay Executive the following compensation and benefits in addition to thecompensation and benefits provided for in Section 6(a) above: (i) Subject to Section 6(c)(ii) below, Executive shall be entitled to be paid: (A) his Base Salary at the rate in effect immediately prior to theeffective date of termination on the Company’s regular pay days for a period oftwo (2) years from the effective date of termination as if his employment hadcontinued until the end of such two (2) year period; and (B) an aggregate amount equal to two (2) times the Bonus Average,which shall be paid in equal installments on the Company’s regular pay daysover the course of twenty-four (24) months from the effective date oftermination. (ii) Whenever compensation is payable to Executive under Section 6(c)(i) during aperiod in which he is partially or totally disabled, and such disability would (exceptfor the provisions hereof) entitle Executive to disability income or salarycontinuation payments from the Company according to the terms of any plan or programpresently maintained or hereafter established by the Company, the disability income orsalary continuation paid to Executive pursuant to any such
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   plan or program shall be considered a portion of the payments required to be made toExecutive pursuant to this Section 6(c) and shall not be in addition thereto. Ifdisability income is payable directly to Executive by an insurance company under theterms of an insurance policy paid for by the Company, the amounts paid to Executiveby such insurance company shall be considered a portion of the payment to be made toExecutive pursuant to this Section 6(c) and shall not be in addition thereto. (iii) Executive and his dependents shall be entitled to continue to receive medical,dental and vision insurance coverage at least equal in type and amount to that madeavailable to full-time senior executives of the Company immediately prior to theeffective date of termination for a period of two (2) years from the effective date oftermination, or until Executive becomes eligible for substantially equivalentemployer-provided health insurance benefits from any other person or business entity,whichever occurs first. In the event that participation in any such plan, program, orarrangement of the Company is prohibited, the Company will arrange to provide benefitssubstantially similar to those benefits which Executive would have been entitled toreceive under such plan, program, or arrangement, for such period. (iv) All of Executive’s then outstanding options to purchase shares of the Company’scommon stock shall be vested and exercisable in accordance with the terms of theGoverning Stock Option Plan, as then in effect.(d) TERMINATION FOR CAUSE. In the event that Executive’s employment is terminated by the Companyfor Cause pursuant to Section 5(c) hereof, the Company shall not be obligated to make anypayments to Executive under this Agreement on or following the effective date of termination,other than the compensation and benefits provided for in Section 6(a) above.(e) VOLUNTARY TERMINATION BY EXECUTIVE. In the event that Executive terminates his employmentwithout Good Reason pursuant to Section 5(e) hereof, the Company shall not be obligated tomake any payments to Executive under this Agreement on or following the date of termination,other than the compensation and benefits provided for in Section 6(a) above.(f) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON. In the event thatExecutive’s employment is terminated by the Company without Cause pursuant to Section 5(f)hereof or by Executive for Good Reason pursuant to Section 5(d) hereof, the Company shall payto Executive the following compensation and benefits in addition to the compensation andbenefits provided for in Section 6(a) above: (i) Executive shall be entitled to be paid:
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 (A) his Base Salary at the rate in effect immediately prior to theeffective date of termination on the Company’s regular pay days for a period oftwo (2) years from the effective date of termination as if his employment hadcontinued until the end of such two (2) year period; and (B) an aggregate amount equal to two (2) times the Bonus Average,which shall be paid in equal installments on the Company’s regular pay daysover the course of twenty-four (24) months from the effective date oftermination. (ii) Executive and his dependents shall be entitled to continue to receive medical,dental and vision insurance coverage at least equal in type and amount to that madeavailable to full-time senior executives of the Company immediately prior to theeffective date of termination for a period of two (2) years from the effective date oftermination, or until Executive becomes eligible for substantially equivalentemployer-provided health insurance benefits from any other person or business entity,whichever occurs first. In the event that participation in any such plan, program orarrangement of the Company is prohibited, the Company will arrange to provide benefitssubstantially similar to those benefits which Executive would have been entitled toreceive under such plan, program or arrangement for such period.  (iii) All of Executive’s then outstanding options to purchase shares of theCompany’s common stock shall be vested and exercisable in accordance with the terms ofthe Governing Stock Option Plan, as then in effect;provided,however, that if the Company terminates Executive’s employment without Cause orExecutive terminates his employment with the Company for Good Reason within the one-yearperiod preceding, or within the two-year period following, a “Change of Control”, Executiveshall be paid the compensation and benefits provided for in Section 7 hereof rather than thecompensation and benefits provided for in this Section 6(f).(g) NO OTHER BENEFITS OR COMPENSATION. Except as may be provided under this Agreement or underthe terms of any Compensation Plans or Benefit Plans in effect and applicable to Executive onthe effective date of termination, Executive shall have no right to receive any othercompensation, or to participate in any other plan, arrangement or benefit after suchtermination and all other obligations of the Company and rights of Executive under thisAgreement shall terminate effective as of the effective date of termination.**7.** **CHANGE OF CONTROL.**(a) RESIGNATION FOLLOWING CHANGE OF CONTROL. If (i) the Company terminates Executive’semployment without Cause or Executive terminates his
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  employment with the Company for Good Reason and (ii) a “Change of Control” has occurredwithin the two-year period preceding, or within the one-year period following, the effectivedate of termination, Executive shall be entitled to the compensation described in thisSection 7 in addition to the compensation and benefits provided for in Section 6(a) aboveand in lieu of the compensation and benefits provided for in Section 6(f) above: (i) a lump sum amount equal to two (2) times the sum of (A) and (B) below: (A) his Base Salary at the rate in effect immediately prior to theeffective date of termination; and  (B) the Bonus Average. (ii) Executive and his dependents shall be entitled to continue to receive medical,dental and vision insurance coverage at least equal in type and amount to that madeavailable to full-time senior executives of the Company immediately prior to theeffective date of termination for a period of two (2) years from the effective date oftermination, or until Executive becomes eligible for employer-provided health insurancebenefits from any other person or business entity (whether or not those healthinsurance benefits are comparable to the health insurance benefits provided by theCompany), whichever occurs first. In the event that participation in any such plan,program, or arrangement of the Company is prohibited, the Company will arrange toprovide benefits substantially similar to those benefits which Executive would havebeen entitled to receive under such plan, program, or arrangement, for such period. (iii) All of Executive’s then outstanding options to pursuant shares of theCompany’s common stock shall be vested and exercisable in accordance with the terms ofthe Governing Stock Option Plan as then in effect.(b) DEFINITION OF CHANGE OF CONTROL. For purposes of this Agreement, a “Change of Control” shallbe deemed to have occurred upon the happening of any of the following: (i) the sale or lease of all or substantially all of the assets of the Company toany other person or entity other than a direct or indirect wholly-owned subsidiary orparent of the Company; (ii) a merger, amalgamation, consolidation or other reorganization of the Companywith any other entity (other than a direct or indirect wholly-owned subsidiary orparent of the Company) in which the Company is not the surviving entity or becomesowned entirely by another entity, unless at least 50% of the outstanding votingsecurities of the surviving or parent corporation, as the case may be, immediatelyfollowing such transaction are beneficially held by the same persons and/or entitiesthat beneficially held the outstanding voting securities of the
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   Company immediately prior to such transaction, and such outstanding votingsecurities are beneficially held by such persons and/or entities in the sameproportion as such persons and/or entities beneficially held the outstanding votingsecurities of the Company immediately prior to such transaction; (iii) the acquisition of beneficial ownership, as such term is defined in theSecurities Exchange Act of 1934, as amended (the “Exchange Act”) in a singletransaction or series of related transactions (by tender offer or otherwise), of morethan 50% of the voting securities of the Company by a single person or entity (otherthan the Company or any affiliate (as such term is defined in Rule 12b-2 under theExchange Act) of the Company (each an “Affiliate”), a trustee or any other fiduciary orcommittee of any employee benefit plan of the Company, or any corporation owned,directly or indirectly, by the stockholders of the Company in substantially the sameproportions as their ownership of the stock of the Company) or “group” within themeaning of Section 13(d)(3) of the Exchange Act, whether through the acquisition ofpreviously issued and outstanding voting securities or of voting securities that havenot been previously issued, or any combination thereof;  (iv) the voluntary or involuntary dissolution, liquidation or winding up of theCompany, or the adoption of any resolution with respect thereto; or  (v) the individuals who constituted the Board of Directors as of the Effective Date(the “Incumbent Board”) ceasing for any reason to constitute at least a majority of theBoard of Directors; provided, that any person becoming a director whose election ornomination for election was approved by a majority of the members of the IncumbentBoard shall be considered, for purposes of this Agreement, a member of the IncumbentBoard; and provided further that, notwithstanding anything herein to the contrary, aChange of Control shall not be deemed to have occurred in connection with (i) anypublic offering of the common stock of the Company for cash; (ii) any transaction withan entity or group that includes, is affiliated with or is wholly or partiallycontrolled by, one or more executive officers of the Company in office immediatelyprior to the transaction that would otherwise constitute a Change of Control; (iii) anycapital raising transaction (including any investment by one or more private equityfunds) for the purpose of financing acquisitions specifically identified by the Boardof Directors of the Company; or (iv) the U.S. Reorganization Transaction.(c) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. In the event that any portion of the payments orbenefits provided to Executive under this Agreement or pursuant to any other plan, arrangementor agreement between Executive and the Company or any Affiliate thereof (collectively, “TotalPayments”) would be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Codeor any similar tax that may hereafter be imposed, then Executive shall be entitled to receivean additional payment (the “Gross-up Payment”) in an amount which, when combined with the net
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  amount of the Total Payments retained by Executive after giving effect to the application ofthe Excise Tax and all other applicable taxes on the Total Payments (including any interestor penalties imposed with respect to such taxes), will result in receipt by Executive of aGross-up Payment equal to the Excise Tax imposed upon the Total Payments. (i) Determination by Accounting Firm. Subject to the provisions of Section7(c)(ii) below, all determinations required to be made under this Section 7(c),including whether a Gross-up Payment is required, the amount of the Gross-Up Paymentand the assumptions to be utilized in arriving at such determination, shall be made bythe Company’s independent auditors or such other certified public accounting firmreasonably acceptable to Executive as may be designated by the Company (the “AccountingFirm”). The Accounting Firm shall provide detailed calculations supporting theGross-up Payment to the Company and Executive. All fees and expenses of the AccountingFirm shall be paid solely by the Company. Any Gross-Up Payment, as determined pursuantto this Section 7(c), shall be paid by the Company to Executive not later than the duedate for the payment of any Excise Tax. Any determination by the Accounting Firm shallbe binding upon the Company and Executive. As a result of the uncertainty in theapplication of Section 4999 of the Code at the time of the initial determination by theAccounting Firm hereunder, it is possible that Gross-Up Payments which will not havebeen made by the Company should have been made (“Underpayment”), consistent with thecalculations required to be made hereunder. In the event that the Company exhausts itsremedies pursuant to Section 7(c)(ii) and Executive thereafter is required to make apayment of any Excise Tax, the Accounting Firm shall determine the amount of theUnderpayment that has occurred and any such Underpayment shall be promptly paid by theCompany to or for Executive’s benefit. (ii) The Company’s Right to Contest Excise Tax. Executive agrees to notify theCompany in writing of any claim by the Internal Revenue Service that, if successful,would require the payment by the Company of the Gross-Up Payment. Such notificationshall be given as soon as practicable but no later than ten (10) business days afterExecutive is informed in writing of such claim and shall apprise the Company of thenature of such claim and the date on which such claim is requested to be paid.Executive shall not pay such claim prior to the expiration of the 30-day periodfollowing the date on which Executive gives such notice to the Company (or such shorterperiod ending on the date that any payment of taxes with respect to such claim is due).If the Company notifies Executive in writing prior to the expiration of such periodthat it desires to contest such claim, Executive agrees to: (A) give the Company any information reasonably requested by theCompany relating to such claim,
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 (B) take such action in connection with contesting such claim asthe Company shall reasonably request in writing from time to time, including,without limitation, accepting legal representation with respect to such claimby an attorney reasonably selected by the Company;  (C) cooperate with the Company in good faith in order toeffectively contest such claim, and  (D) permit the Company to participate in any proceedings relatingto such claim;provided, however, that the Company agrees to bear and pay directly allcosts and expenses (including additional interest and penalties) incurred inconnection with such contest and shall indemnify and hold Executive harmless, on anafter-tax basis, for any Excise Tax or income tax (including interest and penaltieswith respect thereto) imposed as a result of such representation and payment ofcosts and expenses. Without limitation on the foregoing provisions of this Section7(c)(ii), the Company shall control all proceedings taken in connection with suchcontest and, at its sole option, may pursue or forego any and all administrativeappeals, proceedings, hearings and conferences with the taxing authority in respectof such claim and may, at its sole option, either direct Executive to pay the taxclaimed and sue for a refund or contest the claim in any permissible manner, andExecutive agrees to prosecute such contest to a determination before anyadministrative tribunal, in a court of initial jurisdiction and in one or moreappellate courts, as the Company shall determine; provided, however,that if the Company directs Executive to pay such claim and sue for a refund, theCompany shall advance the amount of such payment to Executive, on an interest-freebasis, and shall indemnify and hold Executive harmless, on an after-tax basis, fromany 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 withrespect to such advance; and furtherprovided that any extension of the statute oflimitations relating to payment of taxes for Executive’s taxable year with respectto which such contested amount is claimed to be due is limited solely to suchcontested amount. Furthermore, the Company’s control of the contest shall belimited to issues with respect to which a Gross-Up Payment would be payablehereunder and 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 taxingauthority. (iii) Repayment to the Company. If, after the receipt by Executive of an amountadvanced by the Company pursuant to Section 7(c)(ii), Executive becomes entitled toreceive any refund with respect to such claim, Executive shall promptly pay to theCompany the amount of such refund (together with any interest paid or credited thereonafter taxes applicable thereto). Executive shall be entitled to deduct from anypayment made to the Company pursuant to the previous sentence
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   the amount of any taxes that Executive previously paid on the amount of suchpayment. If, after the receipt by Executive of an amount advanced by the Companypursuant to Section 7(c)(ii), a determination is made that Executive is not entitledto any refund with respect to such claim and the Company does not notify Executivein writing of its intent to contest such denial of refund prior to the expiration ofthirty (30) days after such determination, then such advance shall be forgiven andshall not be required to be repaid and the amount of such advance shall offset, tothe extent thereof, the amount of Gross-Up Payment required to be paid.(d) Notwithstanding anything herein to the contrary, to the extent that Executive has receivedpayments of Base Salary pursuant to Section 6(f)(i) hereof at a time when a “Change ofControl” occurs, such payments shall be deducted from the lump sum payment required to be madeto Executive pursuant to Section 7(a)(i) hereof.**8.** **RESTRICTIVE COVENANTS**(a) COMPETITIVE ACTIVITY. Executive covenants and agrees that at all times during Executive’semployment with the Company, and during the Non-Compete Period (as defined below), Executivewill not, acting alone or in conjunction with others, without the prior written consent of theCompany, directly or indirectly, engage or participate in, assist, render services to or for,or have any active interest or involvement in, whether as an employee, principal, agent,consultant, creditor, lender, advisor, employer, officer, director, stockholder (excludingholdings by Executive of up to 3% of the voting stock of any corporation subject to theperiodic reporting requirements of the Exchange Act), partner, proprietor or in any otherindividual or representative capacity in or with, any person, entity or business whichcompetes, directly or indirectly, with the Company or any Affiliate in any of the businessareas or territories in which the Company or any Affiliate then conducts business or with anydevelopment opportunity being pursued by the Company during the Non-Compete Period. (b)NON-SOLICITATION. Executive covenants and agrees that at all times during Executive’semployment with the Company, and during the Non-Compete Period, Executive will not, withoutthe prior written consent of the Company, directly or indirectly (i) induce, solicit or enticeany customer of the Company or any customer of any Affiliate to patronize any person, businessor entity which competes, directly or indirectly, with the Company or such Affiliate in any ofthe business areas or territories in which the Company or such Affiliate then conductsbusiness; (ii) canvass, solicit or accept any business from any customer of the Company or anycustomer of any Affiliate (other than in connection with the performance by Executive of hisduties and responsibilities for the Company in accordance with this Agreement) in any of thebusiness areas or territories in which the Company or any Affiliate of the Company thenconducts business; (iii) request or advise any customer of the Company or any customer of anyAffiliate to withdraw, curtail or cancel such customer’s business with the Company or suchAffiliate in any of the business areas or territories in which the Company or any Affiliate ofthe Company then conducts business; (iv) contact, communicate with or solicit any prospectthat the Company is
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  actively pursuing or any prospect that any Affiliate is actively pursuing (other than inconnection with the performance by Executive of his duties for the Company in accordancewith this Agreement); (v) disclose to any other person, entity or business the names oraddresses of any customer or acquisition prospect of the Company or any customer oracquisition prospect of any Affiliate (other than as required in connection with theperformance by Executive of his duties for the Company in accordance with this Agreement);(vi) cause, solicit, entice or induce any employee of the Company or any employee of anyAffiliate to leave the employ of the Company or such Affiliate, or to accept employmentwith, or compensation from, Executive or any person, entity or business (other than theCompany or any Affiliate) with which Executive is affiliated or by whom Executive isemployed; or (vii) use any customer lists or customer leads, mail, telephone numbers,printed material or other information obtained from the Company or any Affiliate or anyemployee of any of the foregoing (other than in connection with the performance by Executiveof his duties for the Company in accordance with this Agreement).(c) NON-DISPARAGEMENT. (i) Executive covenants and agrees that Executive shall not engage in any patternof conduct that involves the making or publishing of written or oral statements orremarks (including, without limitation, the repetition or distribution of derogatoryrumors, allegations, negative reports or comments) which are disparaging, deleteriousor damaging to the integrity, reputation or good will of the Company or any Affiliateor any member of management of the Company or any Affiliate. (ii) The Company covenants and agrees that it shall not engage in any pattern ofconduct that involves the making or publishing of written or oral statements or remarks(including, without limitation, the repetition or distribution of derogatory rumors,allegations, negative reports or comments) which are disparaging, deleterious ordamaging to the integrity or reputation of Executive.(d) PROTECTED INFORMATION. Executive recognizes and acknowledges that Executive has had and willcontinue to have access to various confidential and proprietary information concerning theCompany and its Affiliates which is of a special and unique value. As a condition tocommencement of Executive’s employment hereunder, Executive shall execute a Confidentialityand Proprietary Rights Agreement in substantially the form of Exhibit C attached hereto (the“Confidentiality and Proprietary Rights Agreement”). Any breach by Executive of theConfidentiality and Proprietary Rights Agreement shall be considered a breach of thisAgreement.(e) NON-COMPETE PERIOD. For purposes of this Agreement, the term “Non-Compete Period” shall havethe following meanings: (i) in the event (A) Executive’s employment hereunder is terminated by the Companywithout Cause pursuant to Section 5(f), or by Executive for Good
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   Reason pursuant to Section 5(d), and (B) a Change of Control did not occur withinthe two-year period preceding, and does not occur within the one-year periodfollowing, the effective date of termination, the Non-Compete Period shall mean theperiod beginning on the effective date of termination and ending on the secondanniversary of the effective date of termination; (ii) in the event that (A) Executive’s employment hereunder is terminated by theCompany without Cause pursuant to Section 5(f), or by Executive for Good Reasonpursuant to Section 5(d), and (B) a Change of Control occurred within the two-yearperiod preceding the effective date of termination, there shall be no Non-CompetePeriod;  (iii) in the event (A) Executive’s employment hereunder is terminated by the Companywithout Cause pursuant to Section 5(f), or by Executive for Good Reason pursuant toSection 5(d), and (B) a “Change of Control” occurs within the one-year period followingthe effective date of termination, the Non-Compete Period shall mean the periodbeginning on the effective date of termination and ending on the effective date of the“Change of Control”;  (iv) in the event Executive’s employment hereunder is terminated by Executivevoluntarily pursuant to Section 5(e), or by the Company with Cause pursuant to Section5(c), the Non-Compete Period shall mean the period beginning on the effective date oftermination and ending on the first anniversary of the effective date of termination;and  (v) in the event Executive’s employment hereunder is terminated by the Company uponDeath of Executive pursuant to Section 5(a), or upon the Total Disability of Executivepursuant to Section 5(b), there shall be no Non-Compete Period.**9.** **ENFORCEMENT OF COVENANTS.**(a) TERMINATION OF EMPLOYMENT AND FORFEITURE OF COMPENSATION. Notwithstanding anything in thisAgreement to the contrary, in the event that the Board of Directors or a duly authorizedcommittee thereof determines in its good faith judgment that Executive has violated Sections8(a) or 8(b) hereof, the Company shall have the right to suspend or terminate any or allremaining payments or benefits payable pursuant to Section 6 and/or 7 of this Agreement. Suchsuspension or termination of benefits shall be in addition to and shall not limit any and allother rights and remedies that the Company may have against Executive.(b) RIGHT TO INJUNCTION. Executive acknowledges that a breach of the covenants set forth inSection 8 hereof will cause irreparable damage to the Company with respect to which theCompany’s remedy at law for damages will be inadequate. Therefore, in the event of a breachof the covenants set forth in Section 8 by Executive or if the Company has reasonable groundsto believe that a breach by Executive of the covenants set forth in
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  Section 8 is imminent, Executive and the Company agree that the Company shall be entitled tothe following particular forms of relief, in addition to remedies otherwise available to itat law or in equity; (i) injunctions, both preliminary and permanent, enjoining orrestraining such breach or anticipatory breach and Executive hereby consents to the issuancethereof forthwith and without bond by any court of competent jurisdiction; and, in the eventthe Company prevails on the merits after all available appeals have been exhausted (ii)recovery of all reasonable sums expended and costs, including reasonable attorney’s fees,incurred by the Company to enforce the covenants set forth in Section 8.(c) SEPARABILITY OF COVENANTS. The covenants contained in Section 8 hereof constitute a seriesof separate covenants, one for each applicable State in the United States and the District ofColumbia, and one for each province and Territory in Canada. If in any judicial proceeding, acourt shall hold that any of the covenants set forth in Section 8 exceed the time, geographic,or occupational limitations permitted by applicable laws, Executive and the Company agree thatsuch provisions shall and are hereby reformed to the maximum time, geographic, or occupationallimitations permitted by such laws. Further, in the event a court shall hold unenforceableany of the separate covenants deemed included herein, then such unenforceable covenant orcovenants shall be deemed eliminated from the provisions of this Agreement for the purpose ofsuch proceeding to the extent necessary to permit the remaining separate covenants to beenforced in such proceeding. Executive and the Company further agree that the covenants inSection 8 shall each be construed as a separate agreement independent of any other provisionsof this Agreement, and the existence of any claim or cause of action by Executive against theCompany, whether predicated on this Agreement or otherwise, shall not constitute a defense tothe enforcement by the Company of any of the covenants of Section 8.**10.** **MITIGATION OF DAMAGES; ATTORNEY’S FEES**          (a) Executive shall not be required to mitigate the amount of any payment provided for in thisAgreement by seeking other employment.          (b) If any legal action is filed by either party to enforce or interpret any of the provisionsof this Agreement, the non-prevailing party shall pay to the prevailing party, in addition to anyother amounts awarded in the action, all reasonable attorney’s fees and other fees and costsincurred by the prevailing party in connection with such legal action, the amount of which shall befixed by the court hearing such action and made a part of any judgment rendered.**11.** **WITHHOLDING OF TAXES.**The Company may withhold all legally required taxes from any compensation and benefits payableunder this Agreement.**12.** **ASSIGNMENT.**
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Except as otherwise provided in this Agreement, this Agreement shall inure to the benefit of, andbe binding upon, the parties hereto and their respective heirs, representatives, successors andpermitted assigns. The rights, benefits and obligations of Executive under this Agreement arepersonal to Executive and no such right, benefit or obligation shall be subject to voluntary orinvoluntary alienation, assignment or transfer; provided, however, that nothing in this Section 12shall preclude Executive from designating a beneficiary or beneficiaries to receive any benefitpayable on his death. The Company shall require any Successor (whether by purchase of all orsubstantially all of the assets of the Company, merger of the Company into another entity, orotherwise) to assume and agree to perform this Agreement in the same manner and to the same extentthat the Company would have been required to perform if no such succession had taken place. Uponany such assignment, all references herein to the Company shall be deemed to refer to suchassignee.**13.** **ENTIRE AGREEMENT; AMENDMENT.**This Agreement, together with all schedules, exhibits and other documents referred to herein, shallsupersede any and all existing oral or written agreements, representations, or warranties betweenExecutive and the Company relating to the terms of Executive’s employment by the Company. ThisAgreement may not be amended, nor any provision waived, except by a written instrument signed bythe party against whom such amendment or waiver is sought to be enforced.**14.** **GOVERNING LAW; JURISDICTION.**This Agreement shall be governed by and construed in accordance with the internal substantive lawsof the State of Delaware, without giving effect to the conflict of law principles thereof. Theparties agree that all disputes, legal actions, suits and proceedings arising out of or relating tothis Agreement or Executive’s employment with the Company must be brought exclusively in a federaldistrict court or state court of competent jurisdiction located in the State of Delaware. Eachparty hereby irrevocably consents and submits to the exclusive jurisdiction of such courts. Nolegal action, suit or proceeding with respect to this Agreement or Executive’s employment with theCompany may be brought in any other forum. Each party hereby irrevocably waives all claims ofimmunity from jurisdiction and any right to object on the basis that any dispute, action, suit orproceeding brought in any such court has been brought in an improper or inconvenient forum orvenue.**15.** **NOTICES.**Any notice, consent, request or other communication made or given in connection with this Agreementshall be in writing and shall be deemed to have been duly given if delivered personally, mailed byregistered or certified mail (return receipt requested), or by confirmed facsimile to those listedbelow at their following respective addresses or at such other address as each may specify bynotice to the others:
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     To the Company:1122 International Blvd., Suite 601Burlington, Ontario L7L 6Z8Attention: General CounselTo Executive: At the address for Executive set forth on the signature page below.**16.** **MISCELLANEOUS.**(a) WAIVER. The failure of a party to insist upon strict adherence to any term of this Agreementon any occasion shall not be considered a waiver thereof or deprive that party of the rightthereafter to insist upon strict adherence to that term or any other term of this Agreement.The waiver by any party hereto of a breach of any provision of this Agreement shall neitheroperate nor be construed as a general waiver or as a specific waiver of any subsequent breachby any party, unless otherwise expressly provided in such waiver.(b) SEPARABILITY. Subject to Section 9 hereof, if any term or provision of this Agreement orapplication thereof to anyone or under any circumstances shall be determined to be invalid,illegal or unenforceable by any court of competent jurisdiction and cannot be modified to beenforceable, such term or provision shall immediately become null and void, leaving theremainder of this Agreement in full force and effect.(c) HEADINGS. Section headings are used herein for convenience of reference only and shall notaffect the meaning of any provision of this Agreement.(d) RULES OF CONSTRUCTION. Whenever the context so requires, the use of the singular shall bedeemed to include the plural and vice versa.(e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which soexecuted shall be deemed to be an original, and such counterparts will together constitute butone Agreement..(f) RELEASE. Notwithstanding anything herein to the contrary, the Company shall not be requiredto make any of the payments, or provide any of the benefits, to the Executive pursuant toSections 6 or 7 hereof unless and until Executive executes and delivers a release of allclaims arising out of this Executive Employment Agreement through the date of the release, butexcluding claims for indemnification from the Company under the Indemnification Agreementattached hereto as Exhibit A, local, state or federal statutory or constitutional claims, orother claims not arising under this Executive Employment Agreement.
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(g) SURVIVAL. Notwithstanding anything in this Agreement to the contrary, the provisions ofSections 8, 9, 10, 14, 15 and 16 shall survive any termination of Executive’s employment inaccordance with their respective terms.[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and yearfirst above written.THE COMPANY:WASTE SERVICES, INC.     By:  /s/ Edwin D. Johnson     Name:  Edwin D. Johnson   Title:  Executive Vice President and Chief Financial Officer  Date: July 22, 2008  EXECUTIVE: