Document:

EX-10.3

 

Exhibit
10.3

Execution Version

EMPLOYMENT AGREEMENT

     Employment Agreement made as of the Closing (as defined herein), between Velo Holdings Inc.
(“Parent”), Vertrue Incorporated (the “Company”), and Gary A. Johnson, (the “Executive”).

RECITALS:

     WHEREAS, Executive is currently employed by the Company as its President and Chief Executive
Officer;

     WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated as of March 22,
2007, (the “Merger Agreement”) with Parent, pursuant to which Velo Acquisition Inc., a wholly-owned
subsidiary of Parent (“Merger Sub”) will be merged with and into the Company and the Company will
become the surviving corporation in the merger and a wholly-owned subsidiary of Parent (the
“Merger”);

     WHEREAS, in connection with the execution of the Merger Agreement, Executive entered into a
Rollover and Voting Commitment Letter, dated March 22, 2007, (the “Rollover Letter”) with Parent,
pursuant to which (i) Executive agreed to certain commitments relating to his shares of common
stock in the Company prior to the Merger (the “Rollover Securities”), and (ii) Parent and Executive
agreed to enter into an employment agreement upon consummation of the Merger (the “Closing”) to
provide for Executive’s continued employment with the Company (as the surviving entity in the
Merger) following the Closing, substantially on the terms as set forth in the Rollover Letter and
its corresponding Exhibit;

     WHEREAS, on July 18, 2007, certain amendments were made to the Merger Agreement and the
Rollover Letter; and

     WHEREAS, Parent and Executive desire to memorialize the terms of Executive’s continued
employment with the Company after the Merger as set forth in the Rollover Letter, as amended, all
in accordance with the terms contained in this Employment Agreement (the “Agreement”).

     NOW THEREFORE in consideration of the foregoing and the mutual agreements contained herein
(the receipt and adequacy of which are acknowledged), the parties agree as follows:

ARTICLE 1

INTERPRETATION

Section 1.1 Definitions.

     In this Agreement, unless the context otherwise requires, the following terms shall have the
following meanings:

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“Applicable Multiplier” shall mean, for purposes of Section 5.5(b) of this Agreement, two
(2) or three (3), as elected by Executive, in his sole discretion, at the time of his
termination of employment with the Company.

“Business” shall mean the provision of Internet direct marketing services in the vertical
markets of healthcare, personal property, security/insurance, discounts and personals and/or
such other goods and services by the Company and/or its subsidiaries and affiliates in North
America during the term of this Agreement.

“Cash Severance Amount” shall mean the sum of Executive’s Base Salary and targeted Annual
Bonus for the Fiscal Year in which the termination of employment event occurs. For this
purpose, Base Salary shall be the Base Salary in effect at the time Notice of Termination is
given (but prior to any reduction), and targeted Annual Bonus shall be the greater of (i)
the targeted Annual Bonus for the Fiscal Year in which the termination of employment occurs
or (ii) the targeted Annual Bonus for any of the prior three (3) Fiscal Years.

“Cause” shall mean the occurrence of any of the following events:

	 	(a)	 	Executive’s material dishonesty (including, without limitation, embezzlement,
financial misrepresentation, fraud, theft, or other similar action) in his dealings
with the Company or any other entity with which the Company is engaged in or attempting
to be engaged in commerce and the result of such material dishonesty is that there is
material financial or reputational harm to the Company;
	 
	 	(b)	 	Executive’s conviction of, or entry of a plea of guilty or nolo contendere to,
the commission of a felony or the imposition on Executive of any other legal sanction
and the result of such conviction, plea or sanction is that there is material financial
or reputational harm to the Company or that Executive’s ability to perform his duties
under this Agreement is materially impaired; or
	 
	 	(c)	 	Any act or omission by Executive that either Executive intends to have, or a
reasonable person would expect to have, a material adverse effect on the Company,
provided that no act or omission by Executive shall be deemed to constitute Cause if
done, or omitted to be done, in good faith and with the reasonable belief that the act
or omission was in the best interests of the Company.

“Change of Control of the Company” shall mean the occurrence of any of the following events:

	 	(a)	 	Any transfer to, assignment to, or any acquisition by any Person or group
thereof (other than OEP or its controlled affiliates), of the beneficial ownership,
within the meaning of section 13(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”), of any securities of the Company, which transfer, assignment or
acquisition results in such person, corporation, entity, or group thereof, becoming the
beneficial owner, directly or indirectly, of securities of the

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	 	 	 	Company representing more than 50% of the combined voting power of the Company’s
then outstanding securities.
	 
	 	(b)	 	Any Person or group thereof (other than OEP or its controlled affiliates)
acquires (or has acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) substantially all of the assets of the
Company or assets of the Company that have a total gross fair market value of at least
80% of the gross fair market value of all of the assets of the Company immediately
prior to such acquisition or acquisitions. For this purpose, gross fair market value
means the value of the assets of the corporation, or the value of the assets being
disposed of, determined without regard to any liabilities associated with such assets.
	 
	 	(c)	 	The stockholders of the Company approve a plan of complete liquidation of the
Company.

“Change of Control of Parent” shall mean the occurrence of any of the following events:

	 	(a)	 	Any transfer to, assignment to, or any acquisition by any Person or group
thereof (other than OEP or its controlled affiliates), of the beneficial ownership,
within the meaning of section 13(d) of the Exchange Act, of any securities of Parent,
which transfer, assignment or acquisition results in such person, corporation, entity,
or group thereof, becoming the beneficial owner, directly or indirectly, of securities
of Parent representing more than 35% of the combined voting power of Parent’s then
outstanding securities.
	 
	 	(b)	 	A majority of the members of the Parent Board is replaced during any period by
directors whose appointment or election is not endorsed by a majority of the members of
the Parent Board on the Closing or by directors whose appointment, election or
nomination for election was previously approved or recommended by a majority of the
members of the Parent Board on the Closing who were still in office at the time of such
approval or recommendation; provided, however, that any such individual
whose initial assumption of office occurs as a result of or in connection with either
an actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of an entity other than the Parent
Board shall not be so considered as so approved or recommended.
	 
	 	(c)	 	Any Person or group thereof (other than OEP or its controlled affiliates)
acquires (or has acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) substantially all of the assets of Parent
or assets of Parent that have a total gross fair market value of at least 80% of the
gross fair market value of all of the assets of Parent immediately prior to such
acquisition or acquisitions. For this purpose, gross fair market value means the

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	 	 	 	value of the assets of the corporation, or the value of the assets being disposed
of, determined without regard to any liabilities associated with such assets.
	 
	 	(d)	 	The stockholders of Parent approve a plan of complete liquidation of Parent.

“Company Board” shall mean the Board of Directors of the Company.

“Confidential Information” shall mean information, whether or not originated by Executive,
that relates to the business or affairs of Parent, the Company, or any of its clients or
suppliers and is confidential or proprietary to, about or created by Parent, the Company, or
any of its clients or suppliers.

	 	(a)	 	Confidential Information includes, but is not limited to, the following types
of information and other information of a similar nature (whether or not reduced to
writing or designated or marked as confidential):

	 	(i)	 	work product resulting from or related to work or projects
performed or to be performed by the Company, including but not limited to, the
research and conclusions related thereto and the methods, processes,
procedures, analysis, techniques and audits used in connection therewith;
	 
	 	(ii)	 	computer software of any type or form and in any stage of
actual or anticipated development, including but not limited to, programs and
program modules, routines and subroutines, procedures, design concepts, design
specifications (design notes, annotations, documentation, flowcharts, coding
sheets, and the like), source code, object code and load modules, programming,
program patches and system designs;
	 
	 	(iii)	 	information relating to Developments (as hereinafter defined)
prior to any public disclosure thereof, including but not limited to, the
nature of the developments, production data, technical and engineering data,
test data and test results, the status and details of research and development
of products and services, and information regarding acquiring, protecting,
enforcing and licensing proprietary rights (including patents, copyrights and
trade secrets);
	 
	 	(iv)	 	internal Company personnel and financial information, vendor
names and other vendor information, purchasing and internal cost information,
internal services and operational manuals, and the manner and method of
conducting the Business;
	 
	 	(v)	 	marketing and development plans, price and cost data, price and
fee amounts, pricing and billing policies, quoting procedures, marketing
techniques and methods of obtaining business, forecasts and forecast
assumptions and volumes, and future plans and potential strategies of Parent or
the Company which have been or are being discussed, customer names and customer
information;

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	 	(vi)	 	contracts and their contents, client services, data provided by
clients and the type, quantity and specifications of products and services
purchased, leased, licensed or received by clients of the Company; and
	 
	 	(vii)	 	all information which becomes known to Executive as a result
of employment, which Executive acting reasonably, believes is confidential
information or which, Parent or the Company takes measures to protect.

	 	(b)	 	Confidential Information does not include:

	 	(i)	 	the general skills and experience gained during Executive’s
employment;
	 
	 	(ii)	 	information publicly known without breach of this Agreement;
	 
	 	(iii)	 	information, the public disclosure of which is required to be
made by any law, regulation, governmental authority or court (to the extent of
the requirement), provided that before disclosure is made, notice of the
requirement is provided to the Company, and to the extent possible in the
circumstances, the Company is afforded an opportunity to dispute the
requirement; or
	 
	 	(iv)	 	information that was in the public domain prior to the date of
receipt by Executive.

“Constructive Termination Event” shall mean any of the following (which occur without
Executive’s prior written consent), other than such action taken in connection with the
removal of Executive from his responsibilities pending a determination of whether Cause
exists:

	 	(a)	 	failure by the Company to pay material compensation or benefits due and payable
to Executive in connection with his employment;
	 
	 	(b)	 	a material reduction in any compensation or benefits due and payable to
Executive under this Agreement;
	 
	 	(c)	 	a change in Executive’s principal work location which would require him to
commute 50 miles more each way compared to the distance commuted prior to the Merger;
	 
	 	(d)	 	a material diminution of the authorities, duties or responsibilities of
Executive from those set forth in this Agreement and/or the failure of Executive to be
nominated or elected as a director and Chairman of the Parent Board and the Company
Board and/or removal of Executive as a director and Chairman of the Parent Board or the
Company Board;
	 
	 	(e)	 	prior to the end of the Initial Term of this Agreement, the Company provides
notice of nonrenewal of the Agreement;

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	 	(f)	 	a breach by Parent or the Company of any material provision of this Agreement;
or
	 
	 	(g)	 	the failure of Parent to require any successor to the Company (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.

“Developments” shall mean all discoveries, know how, inventions, designs, works of
authorship, ideas, contributions, developments, algorithms, processes, compositions,
techniques or any improvements thereof (whether or not patentable or copyrightable) and
legally recognized proprietary rights (including, but not limited to, patents, copyrights,
trademarks, topographies, know-how and trade secrets), and all records and copies of records
relating to the foregoing, that:

	 	(a)	 	specifically result or derive from Executive’s employment or from Executive’s
knowledge or use of Confidential Information;
	 
	 	(b)	 	are specifically conceived or made by Executive (individually or in
collaboration with others) in the discharge of his duties hereunder;
	 
	 	(c)	 	specifically result from or derive from the use or application of the resources
of the Company; or
	 
	 	(d)	 	specifically relate to the business operations of or actual research and
development by Parent or the Company.

“Excluded Businesses” shall mean Capital Access Network, Inc., Meta4 Group Ltd, and DD
Management Services, LLC, or any successors to such companies.

“Executive Release” shall mean an agreement in a form substantially similar to that attached
hereto as Exhibit B, by which Executive releases all claims against Parent and the
Company.

“Fiscal Year” shall mean the fiscal year of the Company ending June 30 through June 30,
2007, followed by a stub period ending December 31, 2007 and beginning January 1, 2008 shall
be the calendar year unless the parties agree to a different fiscal year.

“Junior Parent Stock” shall mean a share of junior common stock of Parent, par value $0.01
per share.

“Key Person” shall mean any Person who has purchased or licensed from the Company any
product or services produced, sold, licensed, or distributed by the Company in respect of
the Business or supplied the Company with any product to be produced, sold, licensed or
distributed by the Company in respect of the Business.

“OEP” shall mean One Equity Partners II, L.P.

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“Parent Board” shall mean the Board of Directors of Parent.

“Parent Release” shall mean an agreement in a form substantially similar to that attached
hereto as Exhibit C, which Parent and the Company release all claims against
Executive.

“Person” shall mean any individual or other entity possessed of juridical personality,
including, without limitation, a corporation, company, cooperative, partnership, trust,
unincorporated association, affiliate or governmental body; and pronouns when they refer to
a Person shall have a similarly extended meaning.

“Pro Rata Annual Bonus” shall mean a pro rata portion of 100% of the maximum Annual Bonus
Executive would be eligible for at the end of the Fiscal Year in which Executive’s
termination of employment has occurred, with such pro rata bonus determined by multiplying
such maximum Annual Bonus that Executive would be eligible for the Fiscal Year by a
fraction, the numerator of which is the number of days during the Fiscal Year in which
Executive was employed by the Company and the denominator of which is 365.

“Prospective Key Person” shall mean (i) any Person solicited by Executive on behalf of the
Company for any purpose relating to the Business at any time during the twelve (12) month
period immediately preceding the date of the termination of Executive’s employment
hereunder, for any reason; and (ii) any Person solicited by the Company with Executive’s
knowledge for any purpose relating to the Business at any time during the twelve (12) month
period immediately preceding the date of the termination of Executive’s employment
hereunder.

“Restriction Period” shall mean the two (2) year period following Executive’s termination of
employment with the Company for any reason other than termination on account of Total
Disability or death, except that the “Restriction Period” shall mean three (3) years
following Executive’s termination of employment with the Company if the Applicable
Multiplier elected by Executive pursuant to Section 5.5 of this Agreement is three (3).

“Severance Period” shall mean the two (2) year period following the date of Executive’s
termination of employment if the Applicable Multiplier elected by Executive for purposes of
Section 5.5 of this Agreement is two (2), but shall mean the three (3) year period following
the date of Executive’s termination of employment if the Applicable Multiplier elected by
Executive for purposes of Section 5.5 of this Agreement is three (3).

“Territory” shall mean Canada and the United States and any other jurisdiction in which the
Business is conducted at the relevant date.

“Total Disability” or “Totally Disabled” shall mean Executive’s inability, due to physical
or mental incapacity, to substantially perform his duties and responsibilities for a period
of 180 consecutive days as determined by a medical doctor selected by the Company and
reasonably acceptable to Executive or his legal representative. If the

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parties cannot agree
on a medical doctor, each party shall select a medical doctor and the two doctors shall
select a third who shall be the approved medical doctor for this purpose.

“Web Business” means that portion of the Business of the Company carried on through the
Internet.

Section 1.2 Entire Agreement.

     This Agreement constitutes the entire agreement between the parties hereto pertaining to the
subject matter hereof and supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties hereto and there are no
warranties, representations or other agreements between the parties in connection with the subject
matter hereof except as specifically set forth herein.

Section 1.3 Extended Meanings.

     In this Agreement, words importing the singular shall include the plural and vice versa and
words importing gender include all genders.

Section 1.4 Headings.

     The division of this Agreement into Articles and Sections and the insertion of headings are
for convenience of reference only and shall not affect the construction or interpretation of this
Agreement.

Section 1.5 References.

     References to a specific Article, or Section shall be construed as references to that
specified Article, or Section of this Agreement, unless the context otherwise requires.

Section 1.6 Business Day.

     Whenever any payment to be made or action to be taken under this Agreement is required to be
made or taken on a day other than a business day, such payment shall be made or action taken on the
next business day following.

ARTICLE 2

EMPLOYMENT

Section 2.1 Employment.

     Effective upon the Closing, the Company hereby employs Executive, and Executive hereby agrees
to such employment by the Company, upon the terms and subject to the conditions set forth in this
Agreement.

Section 2.2 Employment Period.

     This Agreement and Executive’s employment hereunder shall be effective as of the Closing and
shall continue for a period of four (4) years from the Closing (the “Initial Term”).

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     The Initial
Term shall automatically be extended as follows: (i) ninety (90) days prior to the end of the
Initial Term, this Agreement shall automatically renew for a three (3) year term (the “First
Renewal Term”), (ii) ninety (90) days prior to the end of the First Renewal Term, this
Agreement shall automatically renew for a one (1) year term (the “Second Renewal Term”), and (iii)
ninety (90) days prior to the end of the Second Renewal Term and each one (1) year term thereafter
this Agreement shall automatically renew for a one (1) year term, unless Executive’s employment
hereunder is terminated by the Company or Executive in accordance with the terms hereof or if
written notice of nonrenewal is provided by either the Company or Executive at least ninety (90)
days prior to the end of the applicable term. The period during which Executive is employed by the
Company hereunder is hereinafter referred to as the “Employment Period”. This Agreement shall not
become effective until the Closing. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall be null, void and without effect upon termination of the Merger Agreement, as
amended, pursuant to Article VIII thereof.

Section 2.3 Duties.

	 	(a)	 	During the Employment Period, the Company will employ Executive as its
President and Chief Executive Officer. In such capacity, (i) Executive shall perform
the customary duties and have the customary responsibilities as are consistent with
such positions in a company the size and nature of the Company, (ii) Executive shall
report directly to the Parent Board, and (iii) Executive’s services shall be performed
at the Company’s headquarters as such location was located in Norwalk Connecticut
immediately prior the Closing or such other location as may be mutually agreed between
the Company and Executive. In addition, subject to reasonable and customary direction
by the Parent Board, Executive shall have the specific authority to hire and fire,
consistently with the requirements of applicable law, all executives of the Company,
and shall be responsible for the development of the strategic goals and course of the
Company, both on a short-term and long-term basis.
	 
	 	(b)	 	During the Employment Period, Executive agrees to faithfully serve the Company,
devote his working time, skill, experience and attention to the business of the
Company, its subsidiaries and affiliated entities, and perform the duties under this
Agreement to the best of his abilities. The foregoing shall not prevent Executive from
participating, or owning an equity interest, in any family-owned businesses or in any
currently ongoing or subsequent business venture (including, any of the Excluded
Businesses), serving on boards of directors of charitable or community service
organizations, or investing in a publicly held corporation to the extent that such
activities do not materially interfere with the performance of his duties for the
Company.
	 
	 	(c)	 	Parent agrees to nominate Executive as a member of both the Parent Board and
the Company Board as of the Closing and during the Employment Period to continue to
nominate him as a member of the Parent Board and the Company Board once his membership
expires and to use its best efforts to have him elected as such a member. In addition,
Parent agrees to use its best efforts to appoint

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	 	 	 	Executive as the Chairman of the
Parent Board and the Company Board during the Employment Period.

ARTICLE 3

COMPENSATION AND BENEFITS

     Executive shall receive the following compensation and benefits during his period of
employment with the Company under this Agreement:

Section 3.1 Base Salary.

     As compensation for the performance by Executive of his duties hereunder, the Company shall
pay to Executive base salary at the rate of $750,000 per annum or at such higher rates as may be
determined from time to time (the “Base Salary”) by the Executive Officer Development and
Compensation Committee of Parent or such other committee of the Parent Board as is delegated this
authority (the “Compensation Committee”). Such Base Salary shall be paid in accordance with the
Company’s standard payroll practice for executives. During the Employment Period, Executive’s Base
Salary shall be reviewed annually by the Parent Board (or the Compensation Committee), pursuant to
the Company’s normal compensation and performance review policies for senior level executives. The
amount of any increase for each year shall be determined no later than such time as bonuses are
normally paid to executives of the Company and shall be retroactive to January 1 of that year.
Executive’s Base Salary, plus any increases, may not be decreased at any time during the Employment
Period.

Section 3.2 Annual Bonus.

     During the Employment Period, the Company shall maintain an annual incentive bonus plan for
which Executive will be eligible to participate (the “Bonus Plan”). Executive’s annual target
bonus opportunity under such Bonus Plan shall be equal to no less than: (i) for the 2008 Fiscal
Year, 135.6% of Executive’s then annual Base Salary; (ii) for the 2009 Fiscal Year, 158% of
Executive’s then annual Base Salary; and (iii) for the 2010 Fiscal Year and later, 180% of
Executive’s then annual Base Salary. The performance goals for each Fiscal Year of the Bonus Plan
will be determined after consultation with Executive. For purposes of this Agreement, the term
“Annual Bonus” shall mean the amount of Executive’s annual bonus opportunity established from time
to time pursuant to this Section 3.2.

Section 3.3 Equity Incentive Awards.

     Effective upon the Closing, Executive will be granted the right to purchase restricted shares
of Junior Parent Stock equal in value to $1,430,636 (the “Restricted Stock”). The Restricted Stock
will become vested over a four year period from the Closing, with 25% becoming vested on each
anniversary of the Closing. The Restricted Stock will become fully vested if Executive’s
employment terminates on account of a termination by the Company without Cause or because of a
termination by Executive on account of a Constructive Termination Event, Executive’s Total
Disability, or Executive death. In addition, if a Change of Control of Parent or Change of Control
of the Company occurs, the Restricted Stock will become fully vested on the Change of Control of
Parent or Change of Control of the Company. The other terms and conditions of such Restricted
Stock grant shall be as set forth in the Restricted

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Stock Purchase agreement attached as
Exhibit A, which is specifically incorporated herein by
reference. After the Closing, Executive shall be eligible to purchase or receive such
additional grants of equity in Parent as determined by the Parent Board, in its sole discretion.

Section 3.4 Put Option.

     In the event of Executive’s termination of employment with the Company, Executive (or any
family member of Executive or trustee of a trust that holds Rollover Securities for the benefit of
a family member of Executive) shall be entitled to exercise his rights under Section 1.6(b) of the
Velo Holdings Inc. Stockholders Agreement, dated as of August 16, 2007, (the “Stockholders
Agreement”) with respect to the Rollover Securities held by Executive or such family member or
trust. The terms and condition of Section 1.6(b) of the Stockholders Agreement are herein
incorporated by reference.

Section 3.5 Benefit Plans and Fringe Benefits.

     During the Employment Period, Executive shall be eligible to participate in and receive
benefits under any pension plan, 401(k) savings plan, nonqualified deferred compensation plan, long
term incentive plan, supplemental executive retirement plan, medical and dental benefits plan, life
insurance plan, short-term and long-term disability plans, long-term care plan, supplemental and/or
incentive compensation plans, or any other executive benefit or fringe benefit plan, generally made
available from time to time by the Company to its senior executives in accordance with the
eligibility requirements of such plans and subject to the terms and conditions set forth in this
Agreement, on a basis no less favorable than the basis Executive was participating in such plans
immediately prior to the Closing or at the highest level of any Company executive then currently
participating in any said plan if not in existence on the date of this Agreement. In addition,
during the Employment Period, the Company shall continue to provide to Executive and his family the
$5 million family life insurance coverage pursuant to the life insurance policies as in effect
immediately prior to the Closing.

Section 3.6 Auto Allowance.

     In accordance with the Company’s auto allowance policy for senior executives as in effect
immediately prior to the Closing, during the Employment Period, Executive shall receive a monthly
auto allowance equal to $2,500 ($30,000 annualized) to reimburse Executive for a portion of the
expenses incurred due to the maintenance of his primary vehicle. These expenses include, but are
not limited to, gasoline, mileage and routine maintenance. The amount of this auto allowance will
be reviewed for increase on an annual basis by Executive Officer Development and Compensation
Committee, and shall be maintained during the Employment Period.

Section 3.7 Annual Physical Exam.

     During the Employment Period, Executive is eligible for an in-depth Annual Executive Physical
Exam, performed at the Mayo Clinic or other similar facility, to be paid for in full by the
Company. The Company will arrange for the exam and will be billed directly by the Mayo Clinic or
other similar facility.

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Section 3.8 Use of Corporate Leased Aircraft.

     During the Employment Period, Executive is permitted, in conformity with Company policy as in
effect immediately prior to the Closing, to requisition corporate leased aircraft for business
purposes or personal use; provided, however, that Executive will be responsible to pay for the
incremental cost to the Company of any personal use.

Section 3.9 Business Expenses.

     The Company shall promptly reimburse Executive for all out-of-pocket expenses reasonably and
properly incurred by Executive in connection with his duties hereunder, provided that such expenses
are in accordance with the policies of the Company in effect from time to time for executives. As
may be requested by the Company, Executive shall furnish to the Company statements and vouchers for
all such expenses.

ARTICLE 4

TERMINATION OF EMPLOYMENT

Section 4.1 Termination.

     During the Employment Period, the employment of Executive hereunder may be terminated at any
time by either the Company or Executive, as the case may be, under any of the circumstances set
forth in this Section 4.1. Upon termination, Executive (or his beneficiary or estate, as the case
may be) shall be entitled to receive the compensation and benefits described in Article 5:

	 	(a)	 	By the Company for Cause. Executive’s employment shall not be
terminated for “Cause” unless Executive has been given written notice by the Parent
Board stating the basis for such termination and provided at least 30 days to cure the
neglect or conduct that is the basis of any such claim and, if he fails to cure such
conduct or such conduct cannot be cured, Executive has an opportunity to be heard
before the full Parent Board and after such hearing, the Parent Board gives Executive
written notice confirming that in the judgment of a majority of all the disinterested
directors of Parent, “Cause” for terminating Executive’s employment exists. Neither
the Company nor Executive may be represented by counsel at any hearing before the
Parent Board.
	 
	 	(b)	 	By the Company without Cause. The Company may terminate Executive’s
employment at any time without Cause after providing written notice to Executive. For
purposes of this Agreement, a termination of Executive’s employment by the Company will
be considered to be terminated by the Company without Cause under this paragraph (b)
unless his employment is terminated for Cause (pursuant to paragraph (a)), or by reason
of his death or Total Disability (pursuant to paragraph (c)).
	 
	 	(c)	 	Total Disability. The Company may terminate Executive’s employment
upon his becoming Totally Disabled.

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	 	(d)	 	Death. Executive’s employment shall terminate upon his death.
	 
	 	(e)	 	By Executive Following Constructive Termination Event. Executive will
be considered to have resigned from employment by reason of a Constructive Termination
Event only if:

	 	(i)	 	Executive gives the Company written notice of his objection to
such Constructive Termination Event within 90 days following the occurrence of
such event or condition;
	 
	 	(ii)	 	such event or condition is not corrected, in all material
respects, by the Company in a manner that is reasonably satisfactory to
Executive within 30 days following the Company’s receipt of such notice (or in
the event that such event or condition is not susceptible to correction within
such 30-day period, Executive reasonably determines that the Company has not
taken all reasonable steps within such 30-day period to correct such event or
condition as promptly as practicable thereafter); and
	 
	 	(iii)	 	Executive resigns from his employment with the Company not
more than 30 days following the expiration of the 30-day period described
above, except that if prior to the end of the Initial Term of this Agreement,
the Company provides notice of nonrenewal of the Agreement, Executive resigns
from his employment at any time within 30 days following the last day of the
Initial Term.

	 	(f)	 	By Executive for Any Reason Other Than Constructive Termination Event.
Executive may terminate his employment under this Agreement for any reason other than a
Constructive Termination Event pursuant to paragraph (e) above after providing 30 days’
written notice to the Company.

Section 4.2 Notice of Termination.

     Any termination of employment by the Company or by Executive under this Agreement shall be
communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a
“Notice of Termination” shall mean a notice in writing which shall indicate the specific
termination provision in this Agreement relied upon to terminate Executive’s employment and shall
set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated.

Section 4.3 Deliveries on Termination.

	 	(a)	 	Upon the termination of employment, Executive shall forthwith:

	 	(i)	 	disclose to the Company any and all Developments and execute
and deliver to the Company any and all instruments necessary or desirable to
give effect to the assignments and transfers contemplated by Section 6.2
hereof; and

Page 13

 

	 	(ii)	 	return to the Company all property and materials relating to
the business and affairs of the Company including any Confidential Information
and all copies and reproductions thereof in any form whatsoever received by
Executive and with the Company’s consent delete same from all personal data
bases.

	 	(b)	 	The Company, at its absolute discretion, following the termination of
Executive’s employment may require Executive to provide the Company with a certificate
stating that Executive has complied with paragraph (a) above.

ARTICLE 5

COMPENSATION FOLLOWING TERMINATION OF EMPLOYMENT

     Upon termination of Executive’s employment under this Agreement, Executive (or his designated
beneficiary or estate, as the case may be) shall be entitled to receive the following compensation:

Section 5.1 Earned but Unpaid Compensation.

     In the event that Executive’s employment is terminated at any time for any reason, the Company
shall pay Executive any accrued but unpaid Base Salary (as determined under Section 3.1) for
services rendered to the date of termination, any accrued but unpaid expenses required to be
reimbursed under this Agreement, and any unused vacation accrued to the date of termination.

Section 5.2 Other Compensation and Benefits; Reimbursements.

     In the event that Executive’s employment is terminated at any time for any reason, any
benefits to which Executive may be entitled pursuant to the plans, policies and arrangements
referred to in Section 3.5 above shall be determined and paid in accordance with the terms of such
plans, policies and arrangements. In addition, any reimbursements Executive is entitled to receive
pursuant to Sections 3.6, 3.7 and 3.9, but did not receive as of the date of his termination, shall
be paid to Executive within ten (10) business days following the later of the date his employment
terminates or the date he provides any normally required documentation of those expenses.

Section 5.3 Additional Compensation Payable Following Death or Total Disability.

     In addition to the compensation set forth in Sections 5.1 and 5.2 above, in the event that
Executive’s employment is terminated by reason of his death, or Total Disability pursuant to
Section 4.1(c), the Company shall pay to Executive or Executive’s legal representatives or named
beneficiaries (as the case may be) a bonus payment that shall be the greater of either (i) 50% of
the target Annual Bonus Executive would be eligible for at the end of the Fiscal Year of
Executive’s death or termination due to Total Disability or (ii) the amount calculated by
multiplying the target Annual Bonus Executive would be eligible for at the end of the Fiscal Year
of Executive’s death or termination due to Total Disability times a fraction, the numerator of
which is the number of days of active employment (including weekends and holidays) completed during
the Fiscal Year in which Executive’s death or termination occurs and the denominator of which is
365, which shall be paid to Executive (or his legal representatives or

Page 14

 

named beneficiaries, as the case may be) in a lump sum within 30 days following the date of
Executive’s termination of employment for death or Total Disability. In addition, if Executive’s
employment is terminated by reason of Total Disability, until he attains age 65, Executive and his
designated beneficiaries shall be eligible to continue to participate in all health, medical and
dental benefit plans maintained by the Company for the benefit of its continuing executives, on the
same terms and conditions as offered to such continuing executives; provided, however, if the
coverage is longer than the period Executive would be entitled to continuation coverage under
section 4980B of the Code if Executive elected such coverage and paid the applicable premiums
(“COBRA Coverage”), commencing with the first month immediately following the expiration of the
period the COBRA Coverage would be available, the Company shall provide to Executive such coverage
or reimburse to Executive the costs incurred by him in obtaining covered benefits in accordance
with the requirements of Treas. Reg. §1.409A-3(i)(1)(iv) for the remaining period in which such
continued coverage is required to be provided pursuant to this Section.

Section 5.4 Additional Compensation Payable Following Termination Without Cause or Constructive
Termination Event Within Two Years Following the Closing and Prior to a Change of Control of Parent
or Change of Control of the Company.

	 	(a)	 	Requirements for Additional Compensation. In addition to the
compensation set forth in Sections 5.1 and 5.2 above, Executive will receive the
additional compensation and benefits set forth in paragraph (b) below if the following
requirements are met:

	 	(i)	 	Executive’s employment is terminated for one of the following
reasons within the two (2) year period following the Closing: (A) Termination
by the Company without Cause pursuant to Section 4.1(b) above, or (B)
Resignation by Executive by reason of a Constructive Termination Event pursuant
to Section 4.1(e) above;
	 
	 	(ii)	 	A Change of Control Parent or Change of Control of the Company
has not occurred; and
	 
	 	(iii)	 	Executive executes the Executive Release and Parent and the
Company execute the Parent Release; provided, however, that if Parent and the
Company do not execute the Parent Release, Executive shall not be required to
execute the Executive Release and Executive shall still be entitled to receive
the compensation and benefits set forth in paragraph (b) below.

	 	(b)	 	Additional Compensation.

	 	(i)	 	Base Salary and Annual Bonus. The Company shall pay to
Executive a severance payment equal to 2.99 times the Cash Severance Amount,
which amount shall be paid in substantially equal installments over the two (2)
year period following the date of Executive’s termination of employment,
consistent with the Company’s past payroll practices.

Page 15

 

	 	(ii)	 	Pro Rata Annual Bonus. The Company shall pay to
Executive an amount equal to the Pro Rata Annual Bonus. This Pro Rata Annual
Bonus shall be paid to Executive in a single lump sum within 15 days following
the date of Executive’s termination of employment.
	 
	 	(iii)	 	Group Insurance. Executive, his spouse and eligible
dependents shall continue to be eligible to participate in all health, medical,
dental, and long-term disability benefit plans of the Company for which
Executive, his spouse and eligible dependents were eligible immediately prior
to the date of his termination, or comparable coverage, for two (2) years, or,
if sooner, until comparable health, medical, dental, and long-term disability
insurance coverage is available to Executive, his spouse and eligible
dependents in connection with Executive’s subsequent employment or
self-employment; provided, however, if the coverage is longer than the period
Executive would be entitled to COBRA Coverage, commencing with the first month
immediately following the expiration of the period the COBRA Coverage would be
available, the Company shall provide to Executive such coverage or reimburse to
Executive the costs incurred by him in obtaining covered benefits in accordance
with the requirements of Treas. Reg. §1.409A-3(i)(1)(iv) for the remaining
period in which such continued coverage is required to be provided pursuant to
this clause. The coverage for which Executive, his spouse and eligible
dependents shall continue to be eligible under this paragraph shall be made
available to Executive on the same terms and conditions as are offered to
continuing executives.
	 
	 	(iv)	 	Term Life Insurance. The Company shall provide term
life insurance that is equivalent in coverage, and at no greater cost or tax
cost to Executive, to that elected by Executive, and in effect at the time of
his termination of employment, and which shall be provided until the last day
of the second calendar year beginning after Executive’s termination of
employment, or, if sooner, until comparable life insurance coverage is
available to Executive in connection with his subsequent employment or
self-employment.
	 
	 	(v)	 	Outplacement Services. The Company shall promptly
reimburse, upon receipt of reasonable documentation that Executive has incurred
those expenses, Executive for reasonable outplacement services up to a maximum
of $25,000.

Section 5.5 Additional Compensation Payable Following Termination Without Cause or Constructive
Termination Event After Two Years Following the Closing and Prior to a Change of Control of Parent
or Change of Control of the Company.

	 	(a)	 	In addition to the compensation set forth in Sections 5.1 and 5.2 above,
Executive will receive the additional compensation and benefits set forth in paragraph
(b) below if the following requirements are met:

Page 16

 

	 	(i)	 	Executive’s employment is terminated for one of the following
reasons following the second anniversary of the Closing: (A) Termination by
the Company without Cause pursuant to Section 4.1(b) above, or (B) Resignation
by Executive by reason of a Constructive Termination Event pursuant to Section
4.1(e) above;
	 
	 	(ii)	 	A Change of Control Parent or Change of Control of the Company
has not occurred; and
	 
	 	(iii)	 	Executive executes the Executive Release and Parent and the
Company execute the Parent Release; provided, however, that if Parent and the
Company do not execute the Parent Release, Executive shall not be required to
execute the Executive Release and Executive shall still be entitled to receive
the compensation and benefits set forth in paragraph (b) below.

	 	(b)	 	Additional Compensation.

	 	(i)	 	Base Salary and Annual Bonus. The Company shall pay to
Executive a severance payment equal to the Applicable Multiplier times the Cash
Severance Amount, which amount shall be paid in substantially equal
installments over the two (2) year period following the date of Executive’s
termination of employment, consistent with the Company’s past payroll
practices.
	 
	 	(ii)	 	Pro Rata Annual Bonus. The Company shall pay to
Executive an amount equal to the Pro Rata Annual Bonus. This Pro Rata Annual
Bonus shall be paid to Executive in a single lump sum within 15 days following
the date of Executive’s termination of employment.
	 
	 	(iii)	 	Group Insurance. Executive, his spouse and eligible
dependents shall continue to be eligible to participate in all health, medical,
dental, and long-term disability benefit plans of the Company for which
Executive, his spouse and eligible dependents were eligible immediately prior
to the date of his termination, or comparable coverage, for the Severance
Period, or, if sooner, until comparable health, medical, dental, and long-term
disability insurance coverage is available to Executive, his spouse and
eligible dependents in connection with Executive’s subsequent employment or
self-employment; provided, however, if the coverage is longer than the period
Executive would be entitled to COBRA Coverage, commencing with the first month
immediately following the expiration of the period the COBRA Coverage would be
available, the Company shall provide to Executive such coverage or reimburse to
Executive the costs incurred by him in obtaining covered benefits in accordance
with the requirements of Treas. Reg. §1.409A-3(i)(1)(iv) for the remaining
period in which such continued coverage is required to be provided pursuant to
this clause. The coverage for which Executive, his spouse and eligible

Page 17

 

	 	 	 	dependents shall continue to be eligible under this paragraph shall be made
available to Executive on the same terms and conditions as are offered to
continuing executives.
	 
	 	(iv)	 	Term Life Insurance. The Company shall provide term
life insurance that is equivalent in coverage, and at no greater cost or tax
cost to Executive, to that elected by Executive, and in effect at the time of
his termination of employment, and which shall be provided until the last day
of the second calendar year beginning after Executive’s termination of
employment, or, if sooner, until comparable life insurance coverage is
available to Executive in connection with his subsequent employment or
self-employment.
	 
	 	(v)	 	Outplacement Services. The Company shall promptly
reimburse, upon receipt of reasonable documentation that Executive has incurred
those expenses, Executive for reasonable outplacement services up to a maximum
of $25,000.

Section 5.6 Additional Compensation Payable Following Termination Without Cause or Constructive
Termination Event on or Following a Change of Control of Parent or a Change of Control of the
Company.

	 	(a)	 	In addition to the compensation set forth in Sections 5.1 and 5.2 above,
Executive will receive the additional compensation and benefits set forth in paragraph
(b) below if the following requirements are met:

	 	(i)	 	Executive’s employment is terminated for one of the following
reasons on or following a Change of Control of Parent or Change of Control of
the Company: (A) Termination by the Company without Cause pursuant to Section
4.1(b) above, or (B) Resignation by Executive by reason of a Constructive
Termination Event pursuant to Section 4.1(e) above; and
	 
	 	(ii)	 	Executive executes the Executive Release and Parent and the
Company execute the Parent Release; provided, however, that if Parent and the
Company do not execute the Parent Release, Executive shall not be required to
execute the Executive Release and Executive shall still be entitled to receive
the compensation and benefits set forth in paragraph (b) below.

	 	(b)	 	Additional Compensation.

	 	(i)	 	Base Salary and Annual Bonus. The Company shall pay to
Executive a severance payment equal to 2.99 times the Cash Severance Amount,
which amount shall be paid in (A) for any Change of Control of Parent or Change
of Control of the Company that constitutes a change in the ownership or
effective control of Parent or the Company, or in the ownership of a
substantial portion of the assets of Parent or the Company within the meaning
of section 409A(a)(2)(A)(v) of the Code and its

Page 18

 

	 	 	 	corresponding regulations (a “409A Change of Control Event”) and such
termination occurs within the two year period following the 409A Change of
Control Event, a lump sum within 15 days following the date of Executive’s
termination of employment, or (B) for a Change of Control of Parent or
Change of Control of the Company that does not constitute a 409A Change of
Control Event or the termination occurs after the two year period following
the 409A Change of Control Event, substantially equal installments over the
two (2) year period following the date of Executive’s termination of
employment, consistent with the Company’s past payroll practices.
	 
	 	(ii)	 	Pro Rata Annual Bonus. The Company shall pay to
Executive an amount equal to the Pro Rata Annual Bonus. This Pro Rata Annual
Bonus shall be paid to Executive in a single lump sum within 15 days following
the date of Executive’s termination of employment.
	 
	 	(iii)	 	Group Insurance. Executive, his spouse and eligible
dependents shall continue to be eligible to participate in all health, medical,
dental, and long-term disability benefit plans of the Company for which
Executive, his spouse and eligible dependents were eligible immediately prior
to the date of his termination, or comparable coverage, for two (2) years, or,
if sooner, until comparable health, medical, dental, and long-term disability
insurance coverage is available to Executive, his spouse and eligible
dependents in connection with Executive’s subsequent employment or
self-employment; provided, however, if the coverage is longer than the period
Executive would be entitled to COBRA Coverage, commencing with the first month
immediately following the expiration of the period the COBRA Coverage would be
available, the Company shall provide to Executive such coverage or reimburse to
Executive the costs incurred by him in obtaining covered benefits in accordance
with the requirements of Treas. Reg. §1.409A-3(i)(1)(iv) for the remaining
period in which such continued coverage is required to be provided pursuant to
this clause. The coverage for which Executive, his spouse and eligible
dependents shall continue to be eligible under this paragraph shall be made
available to Executive on the same terms and conditions as are offered to
continuing executives.
	 
	 	(iv)	 	Term Life Insurance. The Company shall provide term
life insurance that is equivalent in coverage, and at no greater cost or tax
cost to Executive, to that elected by Executive, and in effect at the time of
his termination of employment, and which shall be provided until the last day
of the second calendar year beginning after Executive’s termination of
employment, or, if sooner, until comparable life insurance coverage is
available to Executive in connection with his subsequent employment or
self-employment.

Page 19

 

	 	(v)	 	Outplacement Services. The Company shall promptly
reimburse, upon receipt of reasonable documentation that Executive has incurred
those expenses, Executive for reasonable outplacement services up to a maximum
of $25,000.

Section 5.7 No Other Compensation or Benefits.

     Executive shall have no right to receive any compensation, or to participate in any other
plan, arrangement or benefit, following the termination of his employment, except as specifically
provided in this Article 5 or as otherwise agreed to in writing by the Parties.

ARTICLE 6

EXECUTIVE’S COVENANTS

Section 6.1 Company Property.

     Executive acknowledges that all materials relating to the business and affairs of the Company,
including, without limitation, all Developments, manuals, documents, reports, equipment, working
materials and lists of customers or suppliers prepared by Parent or the Company or by Executive in
the course of Executive’s employment are for the benefit of Parent or the Company and are and shall
remain the property of Parent and the Company.

Section 6.2 Confidentiality and Intellectual Property Rights.

	 	(a)	 	Executive will not disclose to any Person, nor use for his own or another
Person’s benefit, either during or after his employment, any Confidential Information,
except as otherwise specifically authorized in writing by Parent or the Company.
	 
	 	(b)	 	Any Development made, conceived, learned or reduced to practice during the
course of Executive’s employment, and all trade secret, patent, copyright, and other
intellectual property rights world-wide therein, are the property of Parent or the
Company, to which all right, title and interest in and to the same are hereby assigned,
whether or not they are capable of statutory protection and whether or not they are
made by Executive or jointly with other persons. Executive also hereby waives all
moral rights into any copyright assigned hereunder. Executive will maintain accurate
records of, and will promptly and fully disclose and confirm the assignment in writing
to the Company (or to a third party designated by the Company), all such Developments.
	 
	 	(c)	 	Executive shall assist Parent or the Company and execute such documents and do
everything reasonably necessary or desirable (other than expending personal sums) to
obtain or enforce patents, copyrights, industrial designs or other legal protection for
such Developments in all countries including any continuation, division, re-issue or
renewal thereof. In the event Parent or the Company is unable for any reason, after
reasonable effort, to secure Executive’s signature on any document needed in connection
with the above-mentioned actions, Executive hereby irrevocably designates and appoints
the Company and its duly authorized officers and agents as his agent and attorney in
fact, which appointment is coupled

Page 20

 

	 	 	 	with an interest to act for and on Executive’s behalf to execute, verify and file
any such documents and to do all other lawfully permitted acts to further the
purposes of this Agreement with the same legal force and effect as if executed by
Executive. Executive hereby waives any and all claims, of any nature whatsoever,
which Executive now or may hereafter have for infringement of any proprietary rights
assigned hereunder to Parent or the Company.

Section 6.3 Non-Competition and Non-Solicitation.

	 	(a)	 	Executive acknowledges that he occupies a position of trust and confidence.
Executive understands that the following restrictions may limit his ability to earn a
livelihood in a business which, directly or indirectly, competes with the Business.
However, Executive agrees that he will receive sufficient consideration and other
benefits both as a result of the Merger and as an Executive of the Company to clearly
justify such restrictions which, in any event, given Executive’s skills and ability
will not prevent him from earning a living. Executive acknowledges that all
restrictions contained in this Section 6.3 are reasonable and valid for the adequate
protection of the legitimate business interests and goodwill of the Company and are no
broader than is necessary to protect such interests and goodwill.
	 
	 	(b)	 	Executive shall not (without the prior written consent of the Company), during
his employment with the Company and for the Restriction Period, whether directly or
indirectly, in any capacity whatsoever, alone, through or in connection with any
Person, carry on or be engaged in or have any financial or other interest in or be
otherwise commercially involved in any endeavor, activity or business in all or part of
the Territory which offers, distributes, sells, licences or produces any product or
provides any service which is competitive with the Business; provided, however, that
this Section 6.3(b) shall not apply to Executive’s activities with any of the Excluded
Businesses.
	 
	 	(c)	 	Executive shall not (without the prior written consent of the Company), during
his employment with the Company and for the Restriction Period, whether directly or
indirectly, in any capacity whatsoever, alone, through or in connection with any
Person, (except for an equity share investment in a public company whose shares are
listed on a stock exchange in North America or in an over-the-counter market provided
that share investment does not in the aggregate exceed 5% of the issued equity shares
of the company and that Executive does not provide any material services to that
company):

	 	(i)	 	solicit or attempt to solicit any Key Person or Prospective Key
Person for the purpose of (i) persuading or attempting to persuade any such Key
Person or Prospective Key Person to cease doing business or to curtail the
business which such Key Person or Prospective Key Person has customarily
conducted or contemplates conducting with the Company; or (ii) soliciting the
business of such Key Person or Prospective Key Person

Page 21

 

	 	 	 	in respect of any products or services which are competitive with the
Business; or
	 
	 	(ii)	 	solicit or attempt to solicit or assist any Person to solicit
the employment or engagement of or otherwise entice away from the employment of
the Company any Executive or consultant of the Company.

Section 6.4 Enforcement of Covenants.

	 	(a)	 	Termination of Employment and Forfeiture of Compensation. Executive
agrees that in the event that he breaches any of the covenants set forth in this
Article 6 during his employment, the Company shall have the right to terminate his
employment for Cause. In addition, Executive agrees that if he breaches any of the
covenants set forth in this Article 6 at any time, the Company in its sole discretion
shall have the right to immediately terminate all payments and benefits due under this
Agreement. Such termination of employment, discontinuance of benefits, and recovery of
damages shall be in addition to and shall not limit any and all other rights and
remedies that the Company may have against Executive.
	 
	 	(b)	 	Right to Injunction. Executive acknowledges and agrees that compliance
with the covenants set forth in this Article 6 is necessary to protect the business and
goodwill of the Company and that any breach of any of such covenants will result in
irreparable and continuing harm to the Company for which money damages may not provide
adequate relief. Accordingly, in the event of breach or anticipatory breach of any of
the covenants set forth in this Article 6 by Executive, Executive and the Company agree
that in addition to remedies otherwise available to the Company at law or equity the
Company shall be entitled to injunctive relief, which relief may be issued without bond
by any court of competent jurisdiction.
	 
	 	(c)	 	Construction of Covenants. The covenants contained in this Article 6
constitute a series of separate covenants. If in any judicial proceeding, a court
shall hold that any of the covenants set forth in Article 6 are not permitted by
applicable laws, Executive and the Company agree that such provisions shall be and are
hereby reformed to the maximum time, geographic, or occupational limitations permitted
by such laws. Further, in the event a court shall hold unenforceable any of the
separate covenants deemed included herein, then such unenforceable covenant or
covenants shall be deemed eliminated from the provisions of this Agreement for the
purpose of such proceeding to the extent necessary to permit the remaining separate
covenants to be enforced in such proceeding. Executive and the Company further agree
that the covenants in this Article 6 shall each be construed as a separate agreement
independent of any other provisions of this Agreement, and the existence of any claim
or cause of action by Executive against the Company whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of any of the covenants set forth in this Article 6.

Page 22

 

Section 6.5 Survival of Covenants.

     The obligations of Executive under this Article shall continue during the course of his
employment with the Company and, unless otherwise provided in writing by the Company, shall survive
the expiration or termination of Executive’s employment and this Agreement.

ARTICLE 7

GENERAL

Section 7.1 Withholding of Taxes.

     The Company shall withhold from any compensation and benefits payable under this Agreement all
applicable federal, state, local, or other taxes and any other amounts legally required to be
withheld.

Section 7.2 No Claim Against Assets.

     Nothing in this Agreement shall be construed as giving Executive any claim against any
specific assets of Parent or the Company or as imposing any trustee relationship upon Parent or the
Company in respect of Executive. Parent and the Company shall not be required to establish a
special or separate fund or to segregate any of its assets in order to provide for the satisfaction
of its obligations under this Agreement. Executive’s rights under this Agreement shall be limited
to those of an unsecured general creditor of Parent and the Company.

Section 7.3 Notices.

     Any notice, demand or other communication which is required or permitted by this Agreement to
be given or made by a party hereto shall be in writing and shall be sufficiently given if delivered
personally or sent by pre-paid registered mail at the following addresses:

	 	(a)	 	to Parent at:

Velo Holdings, Inc.

c/o One Equity Partners II, L.P.

320 Park Avenue

18th Floor

New York, NY

Attention: James Koven

                Daniel Selmonosky

               Christian Ahrens

Facsimile:      (212) 277-1533

with a required copy to:

Dechert LLP

Cira Centre

2929 Arch Street

Philadelphia, PA 19104-2808

Attention: Carmen J. Romano, Esq.

	 	(b)	 	to the Company at:

Page 23

 

Vertrue Incorporated

680 Washington Blvd

Stamford, CT 06901

Attention:     George W.M. Thomas, Esq.

                  
     Senior Vice President and General Counsel

Telephone:    (203) 674-7069

Facsimile:       (203) 674-7026

	 	(c)	 	to Executive at the most recent address on file at the Company,
	 
	 	 	 	with a required copy to:

Morgan, Lewis & Bockius LLP

1701 Market Street

Philadelphia, PA 19103-2921

          Attention: Robert J. Lichtenstein, Esquire

or at such other address as any party may from time to time advise the other party by notice in
writing. Every notice or other communication shall be deemed to have been received, (i) on the
date of receipt, if given by personal delivery, and (ii) the fifth Business Day after which it is
mailed, if sent by registered mail. Notwithstanding the foregoing, if a strike or lockout of
postal employees is in effect, or generally known to be impending, notice shall be effected by
personal delivery.

Section 7.4 Survival.

     Notwithstanding the termination of this Agreement, (a) neither party shall be released from
any obligation that accrued prior to the date of termination; and (b) each party shall remain bound
by the provisions of this Agreement which by their terms impose obligations upon that party that
extend beyond the termination of this Agreement.

Section 7.5 Mitigation.

     Executive shall not be required to mitigate the amount of any payment or benefit provided for
in this Agreement by seeking other employment or otherwise, and except as other specifically
provided herein, there shall be no offset against amounts due Executive under this Agreement on
account of any remuneration attributable to any subsequent employment that Executive may obtain.

Section 7.6 Further Assurances.

     The parties shall, with reasonable diligence, do all things and provide all reasonable
assurances as may be required to complete the transactions contemplated by this Agreement, and each
party shall provide such further documents or instruments required by any other party as may be
reasonably necessary or desirable to give effect to this Agreement and carry out its provisions.

Section 7.7 Assignment.

     Except as otherwise expressly provided herein, neither this Agreement nor any rights or
obligations shall be assignable by either party without the prior written consent of the other
party

Page 24

 

hereto. This Agreement may be assigned to an affiliate of the Company without Executive’s
consent.

Section 7.8 Amendment.

     This Agreement may not be amended except by a written document signed by the party against
whom the amendment is to be enforced.

Section 7.9 Waiver.

     The failure of a party to insist upon strict adherence to any term of this Agreement on any
occasion shall not be considered an ongoing waiver thereof or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of this Agreement.

Section 7.10 Successors and Assigns.

     This Agreement shall inure to the benefit of and be binding upon the parties and their
respective heirs, executors and administrators or successors and permitted assigns, as the case may
be.

Section 7.11 Severability.

     If any provision in this Agreement is determined to be invalid, void or unenforceable by the
decision of any court of competent jurisdiction, which determination is not appealed or appealable
for any reason whatsoever, the provision in question shall not be deemed to affect or impair the
validity or enforceability of any other provision of this Agreement and such invalid or
unenforceable provision or portion thereof shall be severed from the remainder of this Agreement.

Section 7.12 Payment of Attorneys’ Fees.

     The Company shall pay, on an after-tax basis, all reasonable attorneys’ fees and related costs
incurred by Executive in connection with the negotiation of this Agreement.

Section 7.13 Beneficiaries/References.

     Executive shall be entitled, to the extent permitted under any applicable law, to select and
change a beneficiary or beneficiaries to receive any compensation or benefit payable under this
Agreement following Executive’s death by giving the Company written notice thereof. In the event
of Executive’s death or a judicial determination of Executive’s incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to Executive’s beneficiary,
estate or other legal representative.

Section 7.14 Excise Tax.

	 	(a)	 	Notwithstanding anything in the Agreement to the contrary, in the event that
Executive’s employment is terminated within the two (2) year period following the
Closing and it shall be determined that, as a result of the Merger, any

Page 25

 

	 	 	 	payment, distribution, benefit or other entitlement by the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 7.14) (a “Payment”) would be
subject to the excise tax imposed by section 4999 of the Code or any interest or
penalties are incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then Executive shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment by
Executive of all taxes (including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Such Gross-Up Payment shall be paid to Executive at the
time(s) the Payment becomes subject to the Excise Tax.
	 
	 	(b)	 	Notwithstanding anything in the Agreement to the contrary, in the event that it
shall be determined that, as a result of a Change of Control of Parent or a Change of
Control of the Company that occurs prior to an initial public offering of the shares of
Parent or the Company, any Payment would be subject to the Excise Tax, then the
Company, Parent and OEP shall use their best efforts, and Executive shall cooperate, to
obtain the required shareholder vote such that no portion of such Payment would be
subject to the Excise Tax, in accordance with section 280G(b)(5)(B) of the Code.

Section 7.15 Section 409A of the Code.

     With respect to any payments under this Agreement that are deemed to be deferred compensation
subject to the requirements of 409A, such payments are intended to comply with the requirements of
section 409A of the Code. 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
defined in section 409A of the Code) and the deferral of the commencement of any payments or
benefits otherwise payable pursuant to Section 5.4, Section 5.5 or Section 5.6 of this Agreement as
a result of such termination of employment is necessary in order to prevent any accelerated or
additional tax under section 409A of the Code, then the Company will defer 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) that are in excess of the lesser of (i) two (2)
times Executive’s then annual compensation or (ii) two (2) times the limit on compensation then set
forth in section 401(a)(17) of the Code, until the date that is six months following Executive’s
termination of employment with the Company (or the earliest date as is permitted under section 409A
of the Code). If any payments or benefits are deferred due to such requirements, such amounts will
be paid in a lump sum to Executive at the end of such six (6) month period. For purposes of
section 409A of the Code, the right to a series of installment payments under this Agreement shall
be treated as a

Page 26

 

right to a series of separate payments. The Company shall consult with Executive in good
faith regarding the implementation of the provisions of this Section 7.15.

Section 7.16 Indemnification.

     Executive shall be entitled to indemnification in connection with any claim, loss or cause of
action arising from or out of Executive’s performance as a director, officer and/or employee of the
Company or in any other capacity, including any fiduciary capacity, in which Executive served at
the request of the Company to the maximum extent permitted by applicable law and the Company’s
bylaws; provided, however, that Executive shall not be entitled to indemnification hereunder with
respect to any expense, loss, liability or damage which is determined by a court or other tribunal
of competent jurisdiction to have been caused by Executive’s own gross negligence, willful
misconduct or reckless disregard of his duties. The Company shall ensure, at its own expense, that
Executive is covered by the Company’s director and officer liability insurance policies during the
Employment Period and for at least six years thereafter in an amount and on terms no less than that
afforded to the other executives and/or directors of the Company.

Section 7.17 Dispute Resolution.

     Any dispute or controversy arising under or in connection with this Agreement shall be settled
by arbitration in New York City, New York, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the award of the arbitrator(s) in any court
having proper jurisdiction. Executive shall have the authority, in his sole discretion, to hire
counsel to represent him in such arbitration proceeding.

Section 7.18 Governing Law.

     This Agreement shall be governed by and construed in accordance with the laws of the State of
Connecticut, without giving effect to any conflicts or choice of laws rule or provision that would
result in the application of the domestic substantive laws of any other jurisdiction.

Section 7.19 Counterparts.

     This Agreement may be executed by the parties in one or more counterparts, each of which when
so executed and delivered shall be deemed to be an original and such counterparts shall together
constitute one and the same instrument.

Page 27

 

     IN WITNESS WHEREOF the parties have executed this Agreement as of the Closing.

	 	 	 	 	 	 	 	 	 
	VELO HOLDINGS INC.	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	 /s/ Daniel J. Selmonosky	 	 /s/ Gary Johnson	 	 
	 	 	 	 	 	 	 
	Name:

	 	 Daniel J. Selmonosky	 	Date:	 	8/13/2007	 	 
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	Director	 	Address:	 	1051 Cedar Rd.	 	 
	 

	 	 
	 	 	 	 	 	 
	Date:
	 	8/13/2007	 	 	 	Southport, CT 06890	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	VERTRUE INCORPORATED	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:
	 	/s/ George W. M. Thomas	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Name:
	 	George W. M. Thomas	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Title:
	 	Senior Vice President & General
Counsel	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date:
	 	8/13/2007	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 

GUARANTEE:

For good and valuable consideration, including Executive’s agreement to serve as the President and
Chief Executive Officer of the Company and to execute the Rollover Letter, as amended, the
obligations of OEP under Section 3.4 and 7.14 of this Agreement,
dated August 16, 2007, shall be,
jointly and severally, guaranteed by OEP.

	 	 	 
	ONE EQUITY PARTNERS II, L.P.
	 
	 	 
	By:

	 	OEP General Partner II, L.P.,
	 

	 	           Its General Partner
	By:

	 	OEP Holding Corporation
	 

	 	           Its General Partner

	 	 	 	 	 
	By:
	 	/s/ James W. Koven	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Date:
	 	8/15/2007	 	 
	 

	 	 	 	 

Page 28EX-10.4

 

Exhibit 10.4

     Adoption Version

VELO HOLDINGS INC.

RESTRICTED SHARE PURCHASE PLAN

Adopted August 16, 2007

 

 

VELO HOLDINGS INC. RESTRICTED SHARE PURCHASE PLAN

ARTICLE I.

PURPOSE OF THE PLAN

     1.1. The purpose of the Plan is to assist the Company and its Subsidiaries in attracting,
retaining and providing compensation opportunities to valued employees by offering them a greater
stake in the Company’s success and a closer identity with it, and to encourage ownership of the
Company’s stock by such employees.

ARTICLE II.

DEFINITIONS

     2.1. “Award” means an allocation to a Participant of the right to purchase Restricted
Shares under the Plan.

     2.2. “Award Agreement” means the agreement between the Company and a Participant that
specifies the terms and conditions of the purchase right allocated by the Award, including the
period within which the right to purchase Restricted Shares must be exercised, the time within
which payment for those Restricted Shares must be made and the requirement that an election under
section 83(b) of the Code must be made within 30 days of the date of purchase of those Restricted
Shares.

     2.3. “Board” means the Board of Directors of the Company.

     2.4. “Cause” shall have the meaning specified in the Stockholders Agreement.

     2.5. “CEO” means the Company’s President and Chief Executive Officer.

     2.6. “Code” means the Internal Revenue Code of 1986, as amended.

     2.7. “Committee” means the Board or a committee of Board members designated by the
Board to administer the Plan under ARTICLE IV; provided that, in either case, with respect to
Awards granted before the Company’s Common Stock becomes Publicly Traded, the CEO shall be a member
of such Committee.

     2.8. “Common Stock” means the Class A Common Stock of the Company, par value $0.01 per
share, or such other class or kind of shares or other securities resulting from the application of
ARTICLE VIII.

     2.9. “Company” means Velo Holdings Inc., a Delaware corporation, or any successor
corporation.

 

 

     2.10. “Employee” means an officer or other key employee of the Company or a
Subsidiary, including a director who is such an employee.

     2.11. “Fair Market Value” means the fair market value, as determined in accordance with the Stockholders Agreement.

     2.12. “Good Reason” shall have the meaning specified in the Stockholders Agreement.

     2.13. “1934 Act” means the Securities Exchange Act of 1934, as amended.

     2.14. “Participant” means an Employee to whom an Award is made, or the Successor of the Participant, as the context so requires.

     2.15. “Plan” means the Velo Holdings Inc. Restricted Share Purchase Plan herein set
forth, as amended from time to time. The Plan is a compensatory plan within the meaning of Rule
701 promulgated by the Securities and Exchange Commission under the Securities Act of 1933.

     2.16. “Publicly Traded” means that the Company’s Common Stock is listed on an
established stock exchange or exchanges.

     2.17. “Restricted Share” means Common Stock purchased by a Participant pursuant to the
terms of an Award Agreement. Restricted Shares are also “Restricted Securities” under, and subject
to, the Stockholders Agreement.

     2.18. “Restriction Period” means, with respect to particular Restricted Shares, the
period during which such Restricted Shares are subject to repurchase by the Company under the terms
of the Stockholders Agreement.

     2.19. “Stockholders Agreement” means the Stockholders Agreement by and among the
Company, One Equity Partners II, L.P. (“OEP II”), OEP II Co-Investors, L.P. (“OEP II
Co-Invest”), OEP II Partners Co-Invest, L.P. (“OEP II Partners Co-Invest”), Gary A. Johnson,
Brencourt Credit Opportunities Master, Ltd, Brencourt BD, L.L.C., Rho Ventures V L.P. and Rho
Ventures V, Affiliates L.L.C.; the other Investors named therein and each other Person that becomes
a party to that Agreement, dated as of August 16, 2007, as it may hereafter be amended from time to
time.

     2.20. “Subsidiary” means any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company (or any subsequent parent of the Company) if each of the
corporations other than the last corporation in the unbroken chain owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the other corporations in
such chain.

     2.21. “Successor” means: (i) the legal representative of the estate of a deceased
Participant or (ii) the person or persons who shall acquire the right to act with respect to an

3

 

Award by bequest or inheritance or other transfer or by reason of the death of the Participant or
(iii) persons who shall acquire the right to act on behalf of the Participant as the result of a
determination by a court or other governmental agency of the incapacity of the Participant.

     2.22. Capitalized terms used herein as defined terms, but not defined by this Plan, shall have
the meaning specified in the Stockholders Agreement.

ARTICLE III.

ELIGIBILITY

     3.1. Any Employee who is listed on Schedule A attached hereto, or who fills a position listed
under “Pending Hires” on Schedule A, shall receive an Award, provided, however, that no
Shares will be issued to a Participant unless such Participant enters into an Award Agreement and
complies with the terms thereof and becomes a party to the Stockholders Agreement as a Management
Investor (so long as the Stockholders Agreement is still in effect). The number of shares subject
to that Award shall be set by the Board in the resolutions adopting this Plan.

     3.2. If Restricted Shares purchased under this Plan are repurchased while they are Unvested
Restricted Securities, those shares may again be the subject of Awards under this Plan, based on
the CEO’s recommendation, if so determined by the Board, in its sole discretion, at a purchase
price equal to their then Fair Market Value. If at the end of the vesting period specified in the
Stockholders Agreement any of the shares specified in Section 5.1 either have not been purchased,
or having been purchased, have been repurchased but not again awarded, the opportunity to purchase
those shares, at their then Fair Market Value, will be allocated pro rata among those Participants
who are then still actively employed by the Company or any Subsidiary.

ARTICLE IV.

ADMINISTRATION AND IMPLEMENTATION OF PLAN

     4.1. The Plan shall be administered by the Committee, in accordance with its terms and those
of the Stockholders Agreement.

     4.2. The Committee shall have the power to adopt regulations for carrying out the Plan and to
make changes to such regulations as it shall, from time to time, deem advisable, provided that any
such regulations shall be consistent with the terms of the Stockholders Agreement. Any
interpretation by the Committee of the terms and provisions of the Plan and the administration
thereof, and all actions taken by the Committee, shall be final and binding on Participants.

ARTICLE V.

SHARES OF STOCK SUBJECT TO THE PLAN

4

 

     5.1. Subject to adjustment as provided in ARTICLE VIII, the total number of shares of Common
Stock available for Awards under the Plan shall be 390,173.4.

ARTICLE VI.

RESTRICTED SHARES

     6.1. Awards of Restricted Shares shall be evidenced by Award Agreements. Such agreements
shall conform to the requirements of the Plan and the Stockholders Agreement and may contain such
other provisions, consistent with the Plan and the Stockholders Agreement, as the Committee shall
deem advisable.

     6.2. Upon determination of the number of Restricted Shares purchased by the Participant, the
Committee may direct that a certificate or certificates representing that number of shares of
Common Stock be issued to the Participant with the Participant designated as the registered owner,
or may direct that the Participant be designated as registered owner of those Restricted Shares on
the books of the Company’s transfer agent. The certificate(s), if any, representing such shares
shall bear appropriate legends as to sale, transfer, assignment, pledge or other encumbrances to
which such shares are subject under the Stockholders Agreement, and shall be deposited by the
Participant, together with a stock power endorsed in blank, to be held in escrow during the
Restriction Period. If the Restricted Shares are registered by book entry only a stock power
endorsed in blank need be deposited with the Company.

     6.3. During the Restriction Period the Participant shall have the right to receive the
Participant’s allocable share of any cash dividends declared by the Company on its Common Stock and
to vote the Restricted Shares in accordance with Company’s certificate of incorporation, as amended
from time to time.

     6.4. During the Restriction Period the Restricted Shares shall be subject to repurchase as
provided in the Stockholders Agreement.

     6.5. The Board may, in its sole discretion, based on the CEO’s recommendation, modify the
terms of an Award to “Pending Hires” as listed on Schedule A or accelerate the vesting and delivery
of Restricted Shares. The Board shall endeavor, in good faith, to avoid the application of Section
409A of the Code to any amended Award by reason of the acceleration of (i) the vesting of any Award
under the Plan, or (ii) the time of any payment under the Plan.

     6.6. An Employee who purchases Restricted Shares or that Employee’s Successor shall,
regardless of whether the Restriction Period with regard to such Award has lapsed, be bound by the
Stockholders Agreement to the same extent as would a Management Investor, as that term is defined
in the Stockholders Agreement. Accordingly, any Restricted Shares issued under the Plan shall be
held, transferred, sold or otherwise disposed of only in accordance with the Stockholders
Agreement.

5

 

ARTICLE VII.

VESTING

     7.1. Subject to the Board’s authority under Section 6.5, Restricted Shares will become vested
in accordance with the terms of the Stockholders Agreement.

ARTICLE VIII.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

     8.1. In the event of a reorganization, recapitalization, stock split, spin-off, split-off,
split-up, stock dividend, extraordinary dividend issuance of stock rights, combination of shares,
merger, consolidation or any other change in the corporate structure of the Company affecting
Common Stock, or any distribution to stockholders other than an ordinary cash dividend, the
Committee shall make appropriate adjustment in the number and kind of shares authorized by the Plan
and any other adjustments to outstanding Awards as it determines appropriate.

ARTICLE IX.

EFFECTIVE DATE, TERMINATION AND AMENDMENT

     9.1. The Plan shall become effective on August 16, 2007 and shall remain in full force and
effect until the earlier of ten years from the date of its adoption by the Board, or the date it is
terminated by the Board. The Board shall have the power to amend, suspend or terminate the Plan at
any time, provided that any such termination of the Plan shall not affect Awards outstanding under
the Plan at the time of termination.

ARTICLE X.

REPURCHASE OF RESTRICTED SHARES

     10.1. The Company shall have the right and option to purchase all of the Participant’s
Restricted Shares on the terms set forth in the Stockholders Agreement.

6

 

ARTICLE XI.

TRANSFERABILITY

     11.1. Except as provided in the Stockholders Agreement, neither Restricted Shares nor the
right to purchase Restricted Shares may be pledged, assigned or transferred for any reason during
the Participant’s lifetime, and any attempt to do so shall be void.

ARTICLE XII.

GENERAL PROVISIONS

     12.1. Nothing contained in the Plan, or any Award Agreement, shall confer upon any Employee
any right to continued employment by the Company or any Subsidiary, nor interfere in any way with
the right of the Company or a Subsidiary to terminate the employment of any Employee at any time.

     12.2. For purposes of this Plan, a transfer of employment between the Company and its
Subsidiaries shall not be deemed a termination of employment.

     12.3. Participants shall be responsible to make appropriate provision for all taxes required
to be withheld in connection with the purchase of Restricted Shares pursuant to this Plan and any
such taxes that may be required to be withheld by reason of the lapse of the restrictions on such
Restricted Shares, including by reason of the Participant’s failure to make the section 83(b)
election required as a condition of the purchase of Restricted Shares hereunder. Such
responsibility shall extend to all applicable Federal, state, local or foreign withholding taxes.

     12.4. To the extent that Federal laws (such as the 1934 Act, the Code or the Employee
Retirement Income Security Act of 1974) do not otherwise control, the Plan and all determinations
made and actions taken pursuant hereto shall be governed by the laws of Delaware and construed
accordingly.

7

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