Exhibit 10.1


 


SECOND AMENDMENT TO

SECOND AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

(Michael P. Whitman)


 


This Second Amendment to Second Amended and Restated Employment
Agreement dated as of February 6, 2009 (this “Second Amendment”),
is made by and between Power Medical Interventions, Inc., a Delaware
corporation (the “Company”), and Michael P. Whitman (“Executive”).


 


WHEREAS, the Company and Executive are parties to a Second Amended and
Restated Employment Agreement dated March 23, 2007, which agreement was
amended by a First Amendment to Second Amended and Restated Employment
Agreement, dated as of February 4, 2008 (the “Original Agreement”);
and


 


WHEREAS, the parties have been negotiating an amendment to the Original
Agreement since November, 2008 and desire to further amend certain provisions
of the Original Agreement in the manner set forth herein.


 


NOW, THEREFORE, in consideration of the premises and the covenants set
forth herein and in the Original Agreement, the parties hereby agree as
follows:


 


1.                                       Defined
Terms.  Capitalized terms used, but
not defined, herein shall have the meanings ascribed to them in the Original
Agreement.


 


2.                                       Employment
Term.  Section 2 of the Original
Agreement is hereby amended to delete Section 2 in its entirety and to
insert the following in its place:


 


a.                                       Employment
Term.  The term of Executive’s
employment pursuant to this Agreement commenced on January 1, 2007 (the “Effective
Date”), and continues until December 31, 2010, unless earlier
terminated pursuant to the provisions of Section 8 below.  The term of this Agreement shall thereafter
be automatically renewed for additional twenty-four (24) month periods unless
written notice to the contrary shall be given by either party to the other
party not less than one hundred eighty (180) days prior to the end of the
initial term or any renewal term that the term shall not thereafter be
renewed.  The initial term plus any
renewals thereof shall hereafter be referred to as the “Term.”


 


3.                                       Salary.  Section 4.1 of the Original Agreement is
hereby amended to delete Section 4.1(b) in its entirety and to insert
the following in its place:


 


a.                                       Salary
for 2009 and Subsequent Years.  For
calendar year 2009, Executive’s Salary shall be paid at an annual rate of
$385,000.  For each calendar year
thereafter, Executive’s Salary shall be increased each year by the percentage
increase in the US Department of Labor’s Bureau of Labor Statistics Consumer Price
Index for Urban Wage Earners and Clerical Workers in the NY-NJ-CT-PA 


 

















 


metropolitan area Series number CWURA101SA0 (“CPI”) for October of
the preceding calendar year, the intent being to provide Executive with a
minimum Salary of $385,000 plus the amount of the annual CPI adjustments (“Minimum
Salary”).  In no event shall
Executive’s Salary be decreased below the Minimum Salary.  In addition, the Company agrees that the
Executive’s Salary and performance will be reviewed at least annually by the
Board to determine if any additional change in compensation is appropriate.


 


4.                                       Bonus.  Section 4.2 of the Original Agreement is
hereby amended to delete Sections 4.2(c) and (d) in their entirety
and to insert the following provisions in their place:


 


a.                                       2008
Cash Bonus.  On or before December 31,
2008, the Company shall pay Executive a cash bonus of $115,000 for his
performance in 2008.


 


b.                                      Cash
Bonuses for 2009 and Subsequent Years.


 


(i)                                     General.  For each year of the Term commencing in 2009,
Executive shall be eligible to receive three types of annual performance cash
bonuses.  One annual bonus will be based
on the Company’s revenue (the “Revenue Bonus”), another annual bonus
will be based on the Company’s operating income (or loss) (the “Operating
Income Bonus”), and the third potential annual bonus will be determined by
the Board in its sole discretion based upon Executive’s performance (the “Discretionary
Bonus”).  The target amount of the
sum of the annual bonuses for a given year shall be 50% of Executive’s Salary
for such year.  The sum of the annual
bonuses may exceed the target amount to the extent that the Company’s goals are
exceeded.  The formulae for determining
the amounts of the annual bonuses, set forth below, will assign different
weights to each of the three bonuses, such that 60% of the target amount will
be based on the Company’s revenue, 25% will be based on the Company’s operating
income (or loss) and 15% will be determined by the Board in its sole
discretion.


 


(ii)                                  Determination
of Goals.  Prior to the beginning of
each year, after negotiations with Executive, the Board shall determine goals
for revenue and operating income (or loss) to be achieved by the Company during
the upcoming year along with other goals and objectives for the Company.


 


(iii)                               Revenue
Bonus.  On or before March 30 of
each year, commencing in March 2010, the Company shall calculate the
Revenue Bonus payable to Executive for the previous year, based upon the
formula set forth below:


 

















 


RB =                      (S x 0.6)  x  AR


2             GR


 


Where:


 


RB =                      the
amount of the Revenue Bonus for a given year; provided, however, that
this amount shall not exceed 90% of Executive’s Salary.


 


  S =                         Executive’s
Salary for such year;


 


AR =                    the
actual gross revenues recognized by the Company for such year; and


 


GR =                      the
Company’s goal for gross revenues for such year.


 


(iv)                              Operating
Income Bonus.  On or before March 31
of each year, commencing in March 2010, the Company shall calculate the
Operating Income Bonus payable to Executive for the previous year, based upon
the applicable formula set forth below:


 


If AOI and GOI (each as defined below) are both negative numbers:


 


OIB  =  (S x 0.25)  x  GOI


2              AOI


 


If AOI and GOI are both positive numbers:


 


OIB  =  (S x 0.25)  x  AOI


2              GOI


 


If AOI is a positive number and GOI is a negative number:


 


OIB  =  (S x 0.25)  x  (AOI
- 2GOI)


2               (GOI x -1)


 


If AOI is a negative number and GOI is a positive number:


 


OIB  =  (S x 0.25) x        (GOI)           


2            (GOI -2AOI)


 


Where:


 


OIB 
=  the amount of the Operating
Income Bonus for a given year; provided, however, that this amount shall
not exceed 37.5% of Executive’s Salary.


 


S 
=  Executive’s Salary for such
year;


 

















 


AOI =               the
actual operating income (or loss) recognized by the Company for such year; and


 


GOI =                 the Company’s goal for operating
income (or loss) for such year.


 


(iv)                              Discretionary
Bonus.  On or before March 30 of
each year, commencing in March 2010, the Company shall pay Executive a
cash bonus in an amount, if any, which shall be determined by the Board in its
sole discretion; provided, however, that the target amount of the
Discretionary Bonus is equal to 7.5% of Executive’s Salary and the maximum
amount of the Discretionary Bonus is equal to 22.5% of Executive’s Salary.


 


c.                                       Conditional
Upon Employment.  Subject to Section 4.2(e) below,
any bonus payable with respect to a given year shall be contingent upon
Executive serving as an executive officer of the Company at all times during
such year and shall be paid by March 30 of the year following the
performance period.


 


d.                                      Change
of Control.  Notwithstanding any
other provision of this Section 4.2, in the event that the Company enters
into a binding legal agreement with respect to a Change of Control (as defined
in Section 9) during a given year, and the closing of the transaction
occurs during such year or the subsequent year, then Executive’s annual bonuses
for such year shall be equal to 50% of his Salary for such year and such
bonuses shall be paid to him within seven days after the closing of the Change
of Control transaction.  In addition,
Executive shall be paid a special $25,000 transaction bonus upon closing a
Change of Control transaction.


 


e.                                       Customary
Deductions.  All amounts payable to
Executive pursuant to this Section 4.2 shall be subject to customary and
proper payroll deductions.


 


5.                                       2009
Stock Options.


 


a.                                       On
January 13, 2009 the Company granted to Executive a nonqualified option
(the “2009 Option”) to purchase 250,000 shares of the Company’s common
stock at an exercise price equal to the fair market value on the date of
grant.  The 2009 Option shall be subject
to vesting requirements such that 5,209 shares shall be deemed to have vested
on January 31, 2009, and an additional 5,209 shares shall vest at the end
of each month thereafter; provided, however, that 100% of the shares
shall become vested (i) immediately prior to the closing of a Change of
Control, or (ii) immediately after termination of Executive’s employment
without Cause.


 

















 


b.                                      Subject
to Section 5(c), on January 13, 2009, the Company’s Board agreed to
grant to Executive a nonqualified option (the “2009 Exchange Option”) to
purchase 250,000 shares of the Company’s common stock at an exercise price
equal to the fair market value on the date of grant upon satisfaction of the
conditions described in Section 5(c) below.  The 2009 Exchange Option shall be subject to
vesting requirements such that 5,209 shares shall be deemed to have vested on January 31,
2009, and an additional 5,209 shares shall vest, or be deemed to have vested as
the case may be, at the end of each month thereafter; provided, however,
that 100% of the shares shall become vested (i) immediately prior to the
closing of a Change of Control, or (ii) immediately after termination of
Executive’s employment without Cause.


 


c.                                       The
Company’s grant of the 2009 Exchange Option shall be subject to the following
conditions: (i) the Company’s stockholders shall have duly approved an
amendment to the Company’s 2007 Equity Incentive Plan that would permit senior
executives of the Company to exchange outstanding stock options for new stock
options under exchange plans approved by the Board; and (ii) Executive
shall have tendered to the Company for cancellation the nonqualified option
granted to him on January 23, 2008, for 413,768 shares of common stock
(the “2008 Option”), and Executive shall not have exercised such option
in full or in part.


 


d.                                      If
a Change of Control occurs prior to the 2009 Exchange Option having been
issued, the Company will pay Executive a bonus equal to:


 


B 
=  250,000 x (SP - .35) –
2008O


 


Where:


 


B 
=  the amount of this special
bonus.


 


SP 
=  the price per share received by
Company stockholders in the Change of Control transaction


 


2008O 
=  the aggregate proceeds received
or receivable by Executive with respect to the 2008 Option upon the completion
of the Change of Control transaction


 


The intent of this Section 5(c) is to provide the same
economic benefit to Executive as if the transaction contemplated by subsection (b) above
were implemented on January 13, 2009 and this Section 5(d) shall
terminate and be of no further force or effect following the issuance of the
2009 Exchange Option.


 

















 


6.                                       Termination.  Section 8.1(b) of the Original
Agreement is hereby amended to read as follows:


 


a.                                       Upon
involuntary termination by the Company, subject to the requirements of
applicable law, upon determination by the Company that Executive has become
Permanently Disabled (as defined in Section 9);


 


7.                                       Continued
Benefits Following Termination.  Section 8.2(c) of
the Original Agreement is hereby amended to read in its entirety as follows:


 


a.                                       If Executive’s employment is terminated
pursuant to Section 8.1(e) or (f) (i.e., Without Cause or
Employer’s Breach), then (i) Company shall continue to pay to Executive
his Salary in effect as of the date immediately prior to the effective date of
such termination, for the remainder of the term referenced in Section 2, (ii) Company
shall continue to provide health benefits contemplated by Section 4, for
the remainder of the term referenced in Section 2 and Company shall pay to
Executive $2,500 per month for the remainder of the term referenced in Section 2
in lieu of the other benefits and payments contemplated by Section 4, (iii) all
unvested shares under the 2007 Stock Option or 2008 Stock Option, as the case
may be, shall immediately become fully vested and exercisable if they
previously have not become so vested and exercisable, and (iv) Executive
shall have all other rights and remedies available to him at law or in equity
arising out of Company’s breach.


 


8.                                       Severance
Upon Change of Control.  Section 8.2(d) of
the Original Agreement is hereby amended to delete the percentage “150%” and to
insert in its place the percentage “300%” and to add the following sentence
after the end of the existing Section 8.2(d):  Notwithstanding the preceding sentence, the
severance payment shall be paid in a single lump sum within thirty (30) days of
the date of termination only if the transaction constituting a Change of
Control under this Agreement is also a “change in control event” within the
meaning of such term under Section 409A of the Internal Revenue Code of
1986, as amended and the regulations promulgated thereunder (the “Code”).  If the transaction constituting the Change of
Control is not a “change in control event” within the meaning of such term
under Section 409A of the Code or Executive’s employment is terminated
under this Section 8.2(d), then the severance payment shall be paid in
installments as described in Section 8.2(c) above.


 


9.                                       Parachute
Payment.  If any payment or benefit
Executive would receive pursuant to this Agreement (“Payment”) would (i) constitute
a “Parachute Payment” within the meaning of Section 280G of the Code, and (ii) but
for this sentence, be subject to the excise tax imposed by Section 4999 of
the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced
Amount.  The “Reduced Amount” shall be
either (x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or (y) the largest
portion of the Payment, which such amount, after taking into account all
applicable federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate), results in
Executive’s receipt, on an after-tax basis, of the greatest amount of the 


 

















 


Payment notwithstanding that all or some portion of the Payment may be
subject to the Excise Tax.  If a
reduction in payments or benefits constituting “Parachute Payments” is
necessary so that the Payment equals the Reduced Amount, the Payments shall be
reduced on a nondiscretionary basis in such a way as to minimize the reduction
in the economic value deliverable to Executive. 
Where more than one payment has the same value for this purpose and they
are payable at different times they shall be reduced on a pro rata basis.


 


10.                                 Release.  Section 8.2 of the Original Agreement is
hereby amended to add the following subsection immediately after subsection
8.2(d):


 


e.                                       Notwithstanding
any provision to the contrary in this Agreement, Executive shall not be
entitled to receive any payments or benefits pursuant to this Section 8.2
unless he first executes and delivers to the Company a general release of
claims against the Company and its affiliates in form and substance reasonably
satisfactory to the Company.  Without
prejudice to any other right or remedy to which the Company may be entitled,
the Company may terminate its obligations under Section 8.2 if Executive
breaches his obligations under Sections 5, 6.1(b), 8.3 and 10.


 


11.                                 409A
Delay of Payment.  Section 8.2
of the Original Agreement is hereby amended to add the following subsection
immediately after subsection 8.2(e) added under Paragraph 8 above:


 


f.                                         Notwithstanding
anything herein to the contrary, if, at the time of Executive’s termination of
employment with the Company, the Company has securities which are publicly
traded on an established securities market and Executive is a “specified
employee” (as such term is defined in Section 409A of the Code) and it is
necessary to postpone the commencement of any payments or benefits otherwise
payable under this Agreement as a result of such termination of employment to
prevent any accelerated or additional tax under Section 409A of the Code,
then the Company shall postpone the commencement of the payment of any such
payments or benefits hereunder (without any reduction in such payments or
benefits ultimately paid or provided to Executive), until the first payroll
date that occurs after the date that is six months following Executive’s “separation
of service” with the Company (within the meaning of such term under Section 409A
of the Code).  If any payments are
postponed due to such requirements, such postponed amounts shall be paid in a
lump sum to Executive on the first payroll date that occurs after the date that
is six months following Executive’s “separation of service” with the
Company.  If Executive dies during the
postponement period prior to the payment of postponed amount, the postponed
amount shall be paid to the personal representative of Executive’ s estate
within 60 days after the date of Executive’s death.  A “specified employee” shall mean an employee
who, at any time during the 12-month period ending on the identification date,
is a “specified employee” under Section 409A of the Code, as determined by
the Compensation Committee of the Board or its designee.  The determination of specified employees,
including the number and identity of persons considered specified employees and
the identification date, shall 


 

















 


be made by the Compensation Committee of the Board or its designee in
accordance with the provisions of Sections 416(i) and 409A of the Code.


 


12.                                 Application
of Section 409A of the Internal Revenue Code.  The second sentence of Section 8.2(b) of
the Original Agreement is hereby deleted and a new Section 10.12 is hereby
added to the Original Agreement to read in its entirety as follows:


 


10.12                     Application
of Section 409A of the Internal Revenue Code.  This Agreement shall be interpreted to avoid
any penalty sanctions under Section 409A of the Code.  If any payment or benefit cannot be provided
or made at the time specified herein without incurring sanctions under Section 409A
of the Code, then such benefit or payment shall be provided in full at the
earliest time thereafter when such sanctions shall not be imposed.  Executive shall be solely responsible for any
tax imposed under section 409A of the Code and in no event shall the Company
have any liability with respect to any tax, interest or other penalty imposed
under Section 409A of the Code.  For
purposes of Section 409A of the Code, all payments to be made upon a
termination of employment under this Agreement shall only be made upon
Executive’s “ separation from service” (within the meaning of such term under
section 409A of the Code)  In no event
shall Executive, directly or indirectly, designate the calendar year of
payment, except as permitted under Section 409A of the Code.  All reimbursements and in kind benefits
provided under this Agreement shall be made or provided in accordance with the
requirements of Section 409A of the Code, including, where applicable, the
requirement that (i) any reimbursement shall be for expenses incurred
during Executive’s lifetime (or during a shorter period of time specified in
this Agreement), (ii) the amount of expenses eligible for reimbursement,
or in kind benefits provided, during a calendar year may not affect the
expenses eligible for reimbursement, or in kind benefits to be provided, in any
other calendar year, (iii) the reimbursement of an eligible expense shall
be made on or before the last day of the calendar year following the year in
which the expense is incurred, and (iv) the right to reimbursement or in
kind benefits is not subject to liquidation or exchange for another benefit.


 


13.                                 Ratification.  The Original Agreement, as amended hereby, is
hereby ratified and confirmed in all respects and shall continue in full force
and effect.  The Original Agreement
shall, together with this Second Amendment, be read and construed as a single
agreement.


 


14.                                 Governing
Law.  This Second Amendment shall be
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to its principles of conflict of laws.


 


15.                                 Counterparts.  This Second Amendment may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.


 


* * * * *


 

















 


IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Second Amended and Restated Employment Agreement as an instrument under seal as
of the date first written above.


 


 


	
   

  	
  POWER MEDICAL INTERVENTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles W. Federico

  
	
   

  	
  Name: Charles W. Federico

  
	
   

  	
  Title:    Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael P. Whitman

  
	
   

  	
  Michael P. Whitman