Exhibit 10.7
**Employment Agreement**
     This Employment Agreement is made and entered into as of this 13th day ofMarch 2003, by and among Kroll Inc., a Delaware corporation, (hereinafterreferred to a the “Company”), and Jules B. Kroll (the “Executive”).
     WHEREAS, the Executive and the Company desire to embody in this Agreementthe terms and conditions of the Executive’s employment by the Company;
     NOW, THEREFORE, in consideration of the premises and mutual promisescontained in this Agreement, including the compensation paid to the Executive,the parties hereby agree:
**ARTICLE 1**
**Employment, Duties and Responsibilities**
     1.1 Employment. The Company shall employ the Executive as ExecutiveChairman of the Board of Directors. The Executive hereby accepts suchemployment. The Executive agrees to devote his best efforts to promote theinterest of the Company, and, if requested by the Board of Directors of theCompany, for any affiliate of the Company.
     1.2. Duties and Responsibilities. The Executive shall have such dutiesand responsibilities as are consistent with his position and shall perform suchservices not inconsistent with his position as shall, from time to time, bereasonably assigned to him by the Board of Directors of the Company or theChief Executive Officer of the Company.
**ARTICLE 2**
**Term**
     2.1 “Evergreen” Term. The term of the Executive’s employment under thisAgreement (the “Term”) shall commence on the date hereof and shall continue fora two-year “Evergreen” period which shall automatically be renewed and extendedon a daily basis so as to always have two years remaining, unless soonerterminated pursuant to Article V hereof. It is expressly acknowledged andagreed by the parties that it is their intention that the term of thisAgreement shall be “Evergreen” meaning that there always be two years remainingbefore expiration thereof.
 

 

**ARTICLE 3**
**Compensation**
     3.1 Salary, Bonuses and Benefits. As compensation and consideration forthe performance by the Executive of his obligations to the Company under thisAgreement, the Executive shall be entitled to the compensation and benefitsdescribed in the attached Exhibit A (subject, in each case, to the provisionsof ARTICLE 5 hereof).
     3.2 Expenses. The Company will reimburse the Executive for reasonablebusiness-related expenses incurred by him in connection with the performance ofhis duties hereunder during the Term, subject, however, to the Company’swritten policies relating to business-related expenses as in effect, from timeto time, during the Term, a copy of which as previously been provided to theExecutive.
**ARTICLE 4**
**Exclusivity, Confidentiality, and Noncompetition**
     4.1. Exclusivity, Etc. The Executive agrees to perform his duties,responsibilities and obligations hereunder efficiently and to the best of hisability. The Executive agrees that he will devote his entire working time,care and attention and best efforts to such duties, responsibilities andobligations throughout the Term, subject to any obligations to third parties inexistence as of the date hereof, which obligations may not be in conflict withSection 4.2(d) hereof. The Executive also agrees that he will not engage inany other business activities pursued for gain, profit or other pecuniaryadvantage that are competitive with the activities of the Company, except aspermitted in Section 4.2 below. The Executive agrees that all of hisactivities as an employee of the Company shall be in conformity with allpolicies, rules and regulations and directions of the Company not inconsistentwith this Agreement.
4.2 Confidentiality and Noncompetition.
     (a)  The term “Confidential Information,” as employed in this Agreement,means except to the extent such information is otherwise publicly available andsuch public availability was not wrongfully caused in any manner by theExecutive, (i) any object, material, device, substance, data report, record,forecast, interpretation or information, whether written or oral, not in thepublic domain and relating to or reflecting any product, design, process,procedure, information, method of production, business plan, financialinformation, listing of names, addresses or telephone number, trade secretand/or know how, and all matters pertaining thereto, of the Company and itsaffiliates, whether or not contained in any written document, which are or havebeen directly or indirectly communicated to, acquired by, or learned by theExecutive as a result of his relationship (whether as an employee or otherwise)with the Company or any of its affiliate and (ii) and analysis, compilation,note, study, sample, drawing, sketch,
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computer program, computer file or other document, not in the public domain,whether prepared by or under the direction of the Company or any of itsaffiliates, the Executive or others, and all copies, facsimiles, replicas,photographs, and reproductions thereof, which contain, relate to or reflect anyof the aforementioned items.
     (b)  The executive shall not, directly or indirectly, either disclose anyConfidential Information, except to the extent required in the performance ofhis duties as an employee of the Company or use any Confidential Informationfor the benefit of himself or any person, firm, corporation, or associationother than the Company or any of its affiliates, during the Term or thereafter.
     (c)  All samples, drawings, sketches, documents and written information ofany kind reflecting any of the Confidential Information or relating to theCompany’s or any of its affiliates’ business or products which come intopossession of the Executive shall remain the sole property of the Company orsuch affiliate and shall not be copied, photocopied, reprinted or otherwisereproduced or disseminated by the Executive, except in the performance of hisduties as an employee of the Company. Upon the earlier of the Company’srequest therefor or the termination of the Executive’s employment by theCompany, the Executive shall return all such samples, drawings, sketches,documents and written information, and all copies, facsimiles, replicas,photocopies, and reproductions of them, to the Company.
     (d)  The Executive hereby covenants and agrees to refrain, during hisemployment by the Company and for a period of two (2) years after the date oftermination of the Executive’s employment for Cause (as hereinafter defined) orif the Executive terminates employment on his own volition, from directly orindirectly owning any interest in or engage in or performing any services forany person, firm or corporation that directly or indirectly engages in anybusiness which competes with any aspect of the business of the Company,wherever located, either as an individual on his own behalf, or as a partner,employee or agent for any person or partnership, or as an employee, office,agent, director or shareholder of a corporation. The Executive will not at anytime during the period of the Executive’s employment by the Company and for aperiod of two (2) years thereafter induce or assist others to induce or attemptto induce, in any manner, directly or indirectly, any employee, agent,representative, customer or any other person or concern dealing with or in anyway associated with the Company to terminate or to modify in any other fashionto the detriment of the Company such association with the Company. During theterm of his employment with the Company and at any time thereafter, theExecutive shall not himself, and shall not authorize or otherwise allow anyother person or entity (other than the Company) to, use, license or otherwiseexploit (including, but not limited to, the establishment of any domain name),or seek to register or file any application to register, the name or trademark“KROLL,” or any other name confusingly similar thereto, whether alone or incombination with any other word or indicia, in connection with any business,goods or services which compete, directly or indirectly, with any aspect of thebusiness of the Company, wherever located; nor shall the Executive use the nameor trademark “KROLL,” or any other name confusingly similar thereto, whetheralone or in combination with any other word or
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indicia, in any way which could reasonably be expected to tarnish, dilute,disparage, infringe or otherwise adversely impact the goodwill associated withthe Company name or any of the trademarks of the Company; nor shall theExecutive, directly or indirectly, own any interest in or engage in or performany services for any person or entity (other than the Company) that (i) usesthe term “Kroll” as a business name or trade name and (ii) directly orindirectly, engages in any business that competes with any aspect of thebusiness of the Company, wherever located, either as an individual on his ownbehalf, or as a partner, employee or agent for any person or partnership, or asan employee, officer, agent, director or shareholder of a corporation. TheExecutive acknowledges that any use of the “KROLL” name or trademark, or anyother name confusingly similar thereto, in violation of this Agreement willcause irreparable injury to the Company, and the Company shall be entitled totemporary and permanent injunctive relief in any court of competentjurisdiction, without the need to post any bond, in addition to any rights andremedies otherwise available to the Company hereunder or under any otheragreement or applicable law, including the right of the Company to recoverdamages suffered by the Company as a result of the Executive’s violation of anyof the undertaking contained in this paragraph. The Executive represents thathis experience and capabilities are such that the provisions of this paragraphwill not prevent him from earning a livelihood.
**ARTICLE 5**
**Termination**
     5.1 Termination by the Company. The Company shall have the right, subjectto the terms of this Agreement, to terminate the Executive’s employment at anytime, with or without “Cause”. For purposes of this Agreement, “Cause” shallmean (i) substantial failure by the Executive to perform his duties asdescribed in Article I of this Agreement, and such failure is not cured withinten (10) days after written notice from the Company, (ii) a breach by theExecutive of any of the other material terms and conditions of this Agreementand such breach is not cured within ten (10) days after written notice from theCompany, (iii) conduct grossly insubordinate or disloyal to the Company or (iv)pleading no contest or guilty to a felony charge or being convicted of afelony.
     5.2 Termination by the Executive.
     (a)  The Executive shall have the right, subject to the terms of thisAgreement, to terminate his employment at any time with or without “GoodReason.” For purposes of this Agreement, “Good Reason” shall mean (A) a Changein Control of the Company (as defined below); (B) any assignment to Executiveof any duties other than those contemplated by, or any limitation on the powersof Executive in any respect not contemplated by, this Agreement; (C) areduction in Employee’s rate of compensation, not agreed to in writing by him;(D) a failure by Company to comply with any other material provision of thisEmployment Agreement. The Company will have ten (10) days following writtennotice from Executive to cure any of the events contained in this
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subparagraph (a) and Executive shall have the right to terminate for “GoodReason” only in the event the Company fails to cure.
     (b)  “Change in Control of the Company” shall be deemed to have occurred ifany “person” (as such term in sued in Section 13(d) and 14(d) (2) of theExchange Act), other than Jules Kroll personally (and specifically not hisestate or personal representative), is or becomes the “beneficial owner” (asdefined in Rule 13d-3 promulgated under the Exchange Act), directly orindirectly, of securities of the Company representing thirty-five percent (35%)or more of the combined voting power of the Company’s then outstandingsecurities.
     5.3 Death. In the event the Executive dies during the Term, thisAgreement shall automatically terminate, such termination to be effective onthe date of the Executive’s death.
     5.4 Disability. In the event that the Executive shall suffer a disabilitywhich shall have prevented him from performing satisfactorily his obligationshereunder for a period of at least ninety (90) consecutive days or one hundredeighty (180) non-consecutive days within any three hundred sixty-five (365) dayperiod, the Company shall have the right to terminate the Executive’semployment, such termination to be effective upon the given of notice thereofto the Executive in accordance with Section 6.2 hereof.
     5.5. Effect of Termination.
     (a)  In the event of termination of the Executive’s employment for anyreason, the Company shall pay to the Executive (or his beneficiary, heirs orestate in the event of this death) any base salary or other compensation inaccordance with the normal pay practices of the Company upon a termination ofemployees for similar reasons.
     (b)  In the event of termination of the Executive’s employment (i) by theCompany for Cause, (ii) by the Executive for other than for Good Reason,neither the Executives nor any beneficiary, heir or estate of the Executiveshall be entitled to any further compensation other than the amounts describedin section 5.5(a) hereof.
     (c)  In the event of termination of the Executive’s employment by theCompany other than for Cause, or by the Executive for Good Reason, or upon theoccurrence of Executive’s Death or Disability as defined in Sections 5.3 and5.4 hereof, the Company shall immediately pay the Executive, in addition to theamounts described in Section 5.5(a) hereof, an amount equal to the value of theExecutive’s Salary as set forth in Exhibit A to this Agreement, for the fullremainder of the Term. Such amount shall be payable in a lump sum.
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**ARTICLE VI**
**Miscellaneous**
     6.1 Benefit of Agreement; Assignment; Beneficiary.
     (a)  This Agreement shall inure to the benefit of and be binding upon theCompany and their successors and assigns (but only to the extent the Agreementrelates to such entity), including, without limitation, any corporation orperson which may acquire all or substantially all of the Company’s assets orbusiness or with or into which the Company may be consolidated or merged. ThisAgreement shall also inure to the benefit of, and be enforceable by, theExecutive and his personal or legal representatives, executors, administrators,successors, heirs, distributees, devisees and legatees. If the Executiveshould die while any amount would still be payable to the Executive hereunderif he had continued to live, all such amounts shall be paid in accordance withthe terms of this Agreement to the Executive’s beneficiary, devisee, legatee orother designee, or if there is no such designee, to the Executive’s estate.
     (b)  The Company shall require any successor (whether direct or indirect,by operation of law, by purchase, merger, consolidation or otherwise) to all orsubstantially all of the business and/or assets of the Company to expresslyassume and agree to perform this Agreement in the same manner and to the sameextent that the Company would be required to perform it if no such successionhad taken place.
     (c)  Upon a reorganization, merger or consolidation of Kroll Inc. with oneor more corporations as a result of which Kroll Inc. is not to be the survivingcorporation (whether or not Kroll Inc. shall be dissolved or liquidated) orupon the execution of an agreement for the sale or transfer of all orsubstantially all of the assets of Kroll Inc. (“Change-in Control Event”) atthe option of the Executive, the Term shall be modified to eighteen (18) monthsfrom the Change-in-Control Event. Provided, however, that nothing containedin this Section 6.1(c) shall limit or otherwise modify Executive’s rights underARTICLE 5.
     6.2 Notices. Any notice required or permitted hereunder shall be inwriting and shall be sufficiently given if personally delivered or if sent byregistered or certified mail, postage prepaid, with return receipt requested,addressed: (a) in the case of the Company to the Chief Operating Officer ofthe Company; and (b) in the case of Executive, to Executive’s last knownaddress as reflected in the Company’s records, or to such other address asExecutive shall designate by written notice to the Company. Any notice givenhereunder shall be deemed to have been given at the time of receipt thereof bythe person to whom such notice is given if personally delivered or at the timeof mailing if sent by registered or certified mail.
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     6.3 Entire Agreement; Amendment. This Agreement contains the entireagreement of the parties hereto with respect to the terms and conditions ofExecutive’s employment during the Term and supersedes any and all prioragreements and understandings, whether written or oral, between the partieshereto with respect to compensation due for services rendered hereunder. ThisAgreement may not be changed or modified except by an instrument in writingsigned by both of the parties hereto.
     6.5 Waiver. The waiver of either party of a breach of any provision ofthis Agreement shall not operate or be construed as a continuing waiver or as aconsent to or waiver of any subsequent breach hereof.
     6.6 Headings. The Article and Section headings herein are for convenienceof reference only, do not constitute a part of this Agreement and shall not bedeemed to limit or affect any of the provisions hereof.
     6.7 Governing Law. This Agreement shall be governed by, and construed andinterpreted in accordance with, the internal laws of the State of New Yorkwithout reference to the principles of conflict of laws.
     6.8 Agreement to Take Actions. Each party hereto shall execute anddeliver such documents, certificates, agreements and other instruments, andshall take such other actions, as may be reasonably necessary or desirable inorder to perform his or its obligations under this Agreement or to effectuatethe purposes hereof.
     6.9 Venue and Jurisdiction. Any action or proceeding arising from orrelating to this Agreement and/or Executive’s employment or relationship withthe Company shall exclusively be brought in the courts of the State of NewYork, County of New York or in the United States District Court for theSouthern District of New York, and each of the parties hereto consents to thejurisdiction of such courts (and the appropriate appellate courts) in any suchaction or proceeding and waives any objections to venue therein.
     6.10 Survivorship. The respective rights and obligations of the partieshereunder shall survive any termination of this Agreement to the extentnecessary to the intended preservation of such rights and obligations.
     6.11 Validity. The invalidity or unenforceability of any provision orprovisions of this Agreement shall not affect the validity or enforceability ofany other provisions or provisions of this Agreement, which shall remain infull force and effect. In any provision of this Agreement is held to beinvalid, void or unenforceable, any court so holding shall substitute a valid,enforceable provision that preserves, to the maximum lawful extent, the termsand intent of this Agreement.
     6.12 Counterparts. This Agreement may be executed in two or morecounterparts, each of which shall be deemed to be an original but all of whichtogether will constitute one and the same instrument.
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     IN WITNESS WHEREOF, each of the parties hereto has duly executed thisAgreement effective as of the date first written above.        KROLL INC.       By:        Name:        Title:                 Executive  
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**EXHIBIT A TO EMPLOYMENT AGREEMENT**
     Executive shall receive as compensation for his performance under theattached Employment Agreement the following:
     (a)  Salary. The Company shall pay Executive a base salary during theTerm, payable in accordance with the normal payment procedures of the Companyand subject to such withholdings and other normal employee deductions as may berequired by law, at the annual rate of $500,000, for the first calendar year ofthe Term, and thereafter Executive’s salary shall be increased by a rate of notless than 4% of the previous year’s salary on January 1 of each year ofExecutive’s employment. The Compensation Committee of the Board of Directorsof the Company (the “Compensation Committee”) shall also review suchcompensation not less frequently than annually during the Term, but anyadjustment in Executive’s salary may only be greater than as previously setforth.
     (b)  Annual Bonus. The Company will pay a bonus to Executive for netoperating profit in excess of budget and for success in material acquisitionsas determined by the Compensation Committee. In addition to base salary,Executive shall earn incentive compensation (“incentive compensation”) and theCompany shall pay each fiscal year, or any fractional period thereof during theterm, incentive compensation in accordance with the plan approved by theCompensation Committee and/or the Board of Directors each fiscal year.
     (c)  Stock Options. The Executive will be eligible for grants of KrollInc. stock options as follows:
     (i)  The Executive shall be eligible to receive 50,000 stock options, asapproved by the Compensation Committee, upon the effective date of thisAgreement. Such options shall vest as provided in the Kroll Inc. stock optionplans.
     (ii)  The Executive may be eligible for future option awards at thediscretion and approval of the Compensation Committee. Such options shall vestas provided in the Kroll Inc. stock option plans.
     (d)  Additional Compensation. In addition to compensation set forth inSections (a) and (b) above, Executive shall be entitled to the followingAdditional Compensation:
     (i)  On each three-year anniversary date of this Agreement, the Companyshall pay Executive an additional $350,000 over and above all othercompensation to which Executive is entitled. The Executive shall be immediatelyentitled to the $350,000 payment which would have been paid at the three –yearanniversary date next following the date of termination if, prior to the firstthree-year anniversary of this Agreement, the Executive’s employment with theCompany is terminated by the Company other than for
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“Cause” as defined in section 5.1 of the Employment Agreement. The Executiveshall be entitled to a *pro rata*amount of the $350,000 payment for each monthemployed if, subsequent to the first three-year anniversary of this Agreementthe Executive’s employment with the Company is terminated by the Company otherthan for “Cause” as defined in section 5.1 of the Employment Agreement.
     (ii)  The Company will pay Executive $200,000 for each year the Executiveis employed at the Company, from the date hereof, pro rated monthly, for aminimum of 3 years, to be paid out as a consulting fee over five (5) yearsafter executive leaves the Company for any reason other than for “Cause” asdefined in section 5.1 of the Employment Agreement.
     (iii)  The Company guarantees to pay for the Medical and Dental coveragefor the Executive for seven (7) years after the Executive leaves the Companyfor any reason other than for “Cause” as defined in section 5.1 of theEmployment Agreement.
     (e)  Benefits. Executive shall participate during the Term in suchpension, life insurance, health, disability and major medical insurance plans,and in such other employee benefit plans and programs, for the benefit of theemployees of the Company, as may be maintained from time to time during theTerm, in the Company’s discretion, in each case to the extent and in the manneravailable to other officers of the Company and subject to the terms andprovisions of such plans or programs.
     (f)  Vacation. Executive shall be entitled to a paid vacation of at leastthree (3) weeks per annum, in accordance with Company policy (but notnecessarily consecutive vacation weeks) during the Term.
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