Document:

Exhibit

Exhibit 10.1

EXECUTION VERSION

 SECOND INCREMENTAL FACILITY AMENDMENT AND SECOND AMENDMENT 

dated as of May 14, 2019

to the 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

dated as of June 28, 2017

among

MALIBU BOATS, LLC,
as the Borrower

MALIBU BOATS HOLDINGS, LLC,
as the Parent and a Guarantor

THE SUBSIDIARIES OF THE BORROWER IDENTIFIED HEREIN,
as the other Guarantors

THE LENDERS FROM TIME TO TIME PARTY HERETO,

JPMORGAN CHASE BANK, N.A.
as Syndication Agent

FIRST TENNESSEE BANK NATIONAL ASSOCIATION
and
REGIONS BANK,
as Co-Documentation Agents

and

SUNTRUST BANK,
as Administrative Agent, Swingline Lender and Issuing Bank

====================================================================
SUNTRUST ROBINSON HUMPHREY, INC.
and
JPMORGAN CHASE BANK, N.A.,
as Joint Lead Arrangers and Joint Bookrunners

SECOND INCREMENTAL FACILITY AMENDMENT AND SECOND AMENDMENT
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND INCREMENTAL FACILITY AMENDMENT AND SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) dated as of May 14, 2019 to the Credit Agreement referenced below is by and among Malibu Boats, LLC, a Delaware limited liability company (the “Borrower”), Malibu Boats Holdings, LLC, a Delaware limited liability company (the “Parent”), the Guarantors identified on the signature pages hereto, the Incremental Lenders (defined below) and SunTrust Bank, in its capacity as Administrative Agent (in such capacity, the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, a revolving credit facility and term loan facility have been extended to the Borrower pursuant to the Second Amended and Restated Credit Agreement (as further amended, modified, supplemented, increased and extended from time to time, the “Credit Agreement”) dated as of June 28, 2017 among the Borrower, the Parent, the Guarantors identified therein, the Lenders identified therein and the Administrative Agent;

WHEREAS, subject to the terms and conditions of the Credit Agreement, and pursuant to Section 2.23 of the Credit Agreement, the Borrower has requested that (a) the financial institutions identified on the signature pages hereto as “Incremental Lenders” (collectively, the “Incremental Lenders”) provide a portion of an increase to the Aggregate Revolving Commitments in an aggregate principal amount of $35,000,000 as set forth on Schedule I attached hereto (the “Incremental Revolving Commitments”) and (b) each Lender with a Revolving Commitment agrees to extend the Revolving Commitment Termination Date for the Revolving Commitments to July 1, 2024 and (c) the Credit Agreement be otherwise amended in the manner provided for herein; and

WHEREAS, each Incremental Lender has agreed to provide an Incremental Revolving Commitment and the Lenders have agreed to amend the Credit Agreement, in each case on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.    Defined Terms.  Capitalized terms used herein but not otherwise defined herein shall have the meanings provided to such terms in the Credit Agreement as amended by this Amendment.

2.    Increase of Aggregate Revolving Commitments.

(a)    Each Incremental Lender severally agrees to make its portion of the increase in the Aggregate Revolving Commitments available to the Borrower in an amount equal to its Incremental Revolving Commitment. The Incremental Revolving Commitments of the Incremental Lenders shall be as set forth on Schedule I attached hereto. The existing Schedule I to the Credit Agreement shall be deemed to be amended to include the information set forth on Schedule I attached hereto. Subject to the satisfaction of the conditions set forth in Section 4 hereof, the Aggregate Revolving Commitments shall be $120,000,000 after giving effect to this Amendment.

(b)    Subject to the terms and express conditions set forth herein, each Incremental Lender severally agrees to make its Incremental Revolving Commitment available to the Borrower in Dollars commencing on the Effective Date.

(c)    The proceeds of the initial Borrowing pursuant to the Incremental Revolving Commitments shall be used by the Borrower for the purposes set forth in section 5.10 of the Credit Agreement.

(d)    The Applicable Margin with respect to the Incremental Revolving Commitments shall be as set forth in the Credit Agreement.

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(e)    The Commitment Fee with respect to the Incremental Revolving Commitments shall be as set forth in the Credit Agreement.

(f)    The Maturity Date with respect to the Incremental Revolving Commitments established pursuant to this Agreement shall be as set forth in the Credit Agreement.

3.    Amendments to Credit Agreement. Subject to the occurrence of the conditions set forth in Section 4 below:

(a)    Section 1.1 of the Credit Agreement is amended by adding the following definitions in the appropriate alphabetical order:

“Incremental Amount” means the sum of (i) $75,000,000 plus (ii) such additional amounts so long as immediately after giving effect to the establishment of commitments in respect thereof pursuant to Section 2.23 (and assuming the Revolving Commitments (including any increase to the Revolving Commitments contemplated at such time) are fully drawn) and the use of the proceeds of the loans thereunder, the Consolidated Leverage Ratio does not exceed 2.50:1.00 (it being understood and agreed that, unless notified by the Borrower, (A) the Borrower shall be deemed to have utilized amounts of the type described in clause (ii) above prior to the utilization of amounts under clause (i) above and (B) Loans may be incurred in respect of any or all of the clauses (i) and (ii) above, and the proceeds from any such incurrence in respect of clauses (i) and (ii) above, may be utilized in a single transaction by, first, calculating the incurrence in respect of clause (ii) above (without giving effect to any incurrence in respect of clause (i)), and second, calculating the incurrence in respect of clause (i) above (the foregoing amount, the “Available Incremental Amount”)).  Notwithstanding anything in this Agreement to the contrary, any Incremental Term Loans the proceeds of which are used to repay or otherwise redeem, repurchase or retire Term Loans or Revolving Loans (and, in the case of Revolving Loans, permanently reduce the Revolving Commitment by the amount thereof) shall not utilize any portion of the Available Incremental Amount and shall not reduce the Incremental Amount.
“Limited Condition Transaction” means any acquisition or other Investment permitted hereunder by the Borrower or one or more of its Subsidiaries whose consummation is not conditioned on the availability of, or on obtaining, third party financing.
“Mortgaged Property” means any real property of a Loan Party subject to a Mortgage pursuant to the terms hereof.
“Screen Rate” shall mean the rate specified in the definition of LIBOR.
“Second Amendment Effective Date” means the date on which the conditions set forth in Section 4 of the Second Incremental Facility Amendment and Second Amendment have been met.
“Second Incremental Facility Amendment and Second Amendment” shall mean that certain Second Incremental Facility Amendment and Second Amendment to Second Amended and Restated Credit Agreement dated as of May 14, 2019 among the Borrower, the Parent, the other Guarantors party thereto, the Lenders from time to time party thereto and the Administrative Agent.
(b)    In Section 1.1 of the Credit Agreement, the definition of “Aggregate Revolving Commitments” is amended to read as follows:

“Aggregate Revolving Commitments” shall mean the Revolving Commitments of all the Lenders at any time outstanding.  As of the Second Amendment Effective Date, the aggregate amount of the Aggregate Revolving Commitments is $120,000,000.

(c)    In Section 1.1 of the Credit Agreement, the definition of “Applicable Margin” is amended by deleting the current pricing grid set forth therein and replacing it with the following:

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	Level
	Consolidated Leverage Ratio
	Eurodollar Loans and Letter of Credit Fee
	Base Rate
Loans
	Commitment
Fee and Delayed Draw Term Loan Commitment Fee

	I
	<1.00:1.00
	1.25%
	0.25%
	0.20%

	II
	≥ 1.00:1.00 but < 1.75:1.00
	1.50%
	0.50%
	0.25%

	III
	≥ 1.75:1.00 but ˂ 2.50:1.00
	1.75%
	0.75%
	0.30%

	IV
	≥ 2.50:1.00 but ˂ 3.00:1.00
	2.00%
	1.00%
	0.35%

	V
	≥ 3.00:1.00
	2.25%
	1.25%
	0.40%

(d)    In Section 1.1 of the Credit Agreement, clause (J) of the definition of “Consolidated EBITDA” is hereby amended to read as follows:
        
“(J) cash expenses in connection with restructurings and other management initiatives and any other non-recurring cash expenses, in an aggregate amount not to exceed ten percent (10%) of Consolidated EBITDA (calculated prior to giving effect to this addback) in any four fiscal quarter period”

(e)    In Section 1.1 of the Credit Agreement, clauses (f) and (g) of the definition of “Consolidated Excess Cash Flow” are hereby amended to read as follows:

“(f) voluntary prepayments during such period made on Consolidated Total Debt permitted under Sections 7.1(b), (g), (o), (r) or (t) minus”

“(g) Restricted Payments permitted under Sections 7.5(d), (f), (i) and (j) during such period minus”

(f)    In Section 1.1 of the Credit Agreement, in the definition of “Consolidated Leverage Ratio”, the reference to “$20,000,000” is hereby replaced with a reference to “$30,000,000”. 

(g)    In Section 1.1 of the Credit Agreement, the last sentence in the definition of “Delayed Draw Term Loan Commitments” is hereby amended to read as follows:

As of the Second Amendment Effective Date, (i) the Delayed Draw Term Loans have been borrowed in full and the Delayed Draw Term Loan Commitments have been terminated, (ii) Twenty-Two Million Nine Hundred Sixty-Eight Thousand Seven Hundred Fifty Dollars ($22,968,750) of Delayed Draw Term Loans have been converted to outstanding Revolving Loans pursuant to Section 2.2 and (iii) the aggregate principal amount of all Lenders’ Delayed Draw Term Loans is Forty-Nine Million Two-Hundred Eighteen Thousand Seven Hundred Fifty Dollars ($49,218,750). 

(h)    In Section 1.1 of the Credit Agreement, in  the definition of “Interest Period”, clause (e) is hereby amended to read as follows:

“(e)    no Interest Period for any Revolving Loan may extend beyond the date specified in clause (i) of the definition of Revolving Commitment Termination Date, and no Interest Period for any Term Loan may extend beyond the date specified in clause (i) of the definition of Maturity Date.”

(i)    In Section 1.1 of the Credit Agreement, in the definition of “LIBOR”, the following parenthetical is hereby inserted immediately prior to the phrase “; provided, that”:
    
(such rate, the “Screen Rate”)

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(j)    In Section 1.1 of the Credit Agreement, in the definition of “Material Indebtedness”, the reference to “$7,500,000” is hereby replaced with a reference to “$15,000,000.”

(k)    In Section 1.1 of the Credit Agreement, the definition of “Permitted Acquisition” is amended by deleting the reference in clause (b) to “Closing Date” and replacing it with a reference to “Second Amendment Effective Date” and the following proviso is added as an additional proviso to such definition:  

“; provided, further, that the requirements herein shall be subject to Section 1.7 hereof in the case of a Limited Condition Transaction.”

(l)    In Section 1.1 of the Credit Agreement, the definition of “Revolving Commitment Termination Date” is amended to read as follows:

“Revolving Commitment Termination Date” shall mean the earlier of (i) July 1, 2024 and (ii) the date on which the Revolving Commitments are terminated pursuant to Section 2.8 or 8.1.

(m)    In Section 1.1 of the Credit Agreement, in the definition of “Share Repurchase Payments”, each reference to “$20,000,000” is hereby replaced with a reference to “$35,000,000.”

(n)    In Section 1.1 of the Credit Agreement, the last sentence in the definition of “Term Loan A Commitment” is hereby amended to read as follows:

As of the Second Amendment Effective Date, (i) the Term Loan A has been borrowed in full and the Term Loan A Commitment has been terminated, (ii) Twelve Million Thirty-One Thousand Two Hundred Fifty Dollars ($12,031,250) of Term Loan A have been converted to outstanding Revolving Loans pursuant to Section 2.2 and (iii) the aggregate principal amount of all Lenders’ Term Loan A is Twenty-Five Million Seven Hundred Eighty-One Thousand Two-Hundred Fifty Dollars ($25,781,250).

(o)    The following new Section 1.7 is hereby added immediately following Section 1.6 of the Credit Agreement:

1.7    Limited Condition Transactions.  Notwithstanding anything in this Agreement or any Loan Document to the contrary, when (i) calculating any applicable ratio in connection with the making of an Investment, including any Permitted Acquisitions, the making of a Restricted Payment or the repayment of Indebtedness, (ii) determining the accuracy of any representation or warranty, (iii) determining whether any Default or Event of Default has occurred, is continuing or would result from any action, or (iv) determining compliance with any other condition precedent to any action or transaction, in each case of clauses (i) through (iv) in connection with a Limited Condition Transaction, the date of determination of such ratio, the accuracy of such representation or warranty (but taking into account any earlier date specified therein), whether any Default or Event of Default has occurred, is continuing or would result therefrom, or the satisfaction of any other condition precedent shall, at the option of the Borrower (the Borrower’s election to exercise such option in connection with any Limited Condition Transaction, an “LCA Election”), be deemed to be the date of declaration of such Restricted Payment or the date that the definitive agreement for such Restricted Payment, Investment, or repayment, repurchase or refinancing of Indebtedness is entered into, or the date such notice, which may be conditional, of such repayment, repurchase or refinancing of Indebtedness is given to the holders of such Indebtedness (the “LCA Test Date”).  If on a Pro Forma Basis after giving effect to such Limited Condition Transaction and the other transactions to be entered into in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) such ratios, representations and warranties, absence of defaults, satisfaction of conditions precedent and other provisions are calculated as if such Limited Condition Transaction or other transactions had occurred at the beginning of the most recent fiscal quarter ending prior to the LCA Test Date for which financial statements have been delivered pursuant to Section 5.1(a) or (b), as applicable, the Borrower could have taken such action on the relevant LCA Test Date in compliance with the applicable ratios or other provisions, such provisions shall be deemed to have been complied with, (x) unless an Event of Default pursuant to 8.1(a), 8.1(b), 8.1(h), 8.1(j) or 8.1(i) shall be continuing on the date such 

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Limited Condition Transaction is consummated, and (y) so long as the date on which such Limited Condition Transaction occurs is not more than six (6) months after the LCA Test Date.  For the avoidance of doubt, (i) if any of such ratios, representations and warranties, absence of defaults, satisfaction of conditions precedent or other provisions are exceeded or breached as a result of fluctuations in any such ratio (including due to fluctuations in Consolidated EBITDA), a change in facts and circumstances or other provisions at or prior to the consummation of the relevant Limited Condition Transaction, such ratios, representations and warranties, absence of defaults, satisfaction of conditions precedent and other provisions will not be deemed to have been exceeded, breached, or otherwise failed as a result of such fluctuations or changed circumstances solely for purposes of determining whether the Limited Condition Transaction and any related transactions are permitted hereunder and (ii) such ratios and compliance with such conditions shall not be tested at the time of consummation of such Limited Condition Transaction, so long as the date on which such Limited Condition Transaction is consummated is not more than six (6) months after the LCA Test Date.  If the Borrower has made an LCA Election for any Limited Condition Transaction, then in connection with any subsequent calculation of any ratio or basket availability with respect to any other transaction on or following the relevant LCA Test Date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the date that the definitive agreement for such Limited Condition Transaction is terminated or expires without consummation of such Limited Condition Transaction, any such ratio or basket shall be calculated on a Pro Forma Basis assuming such Limited Condition Transaction and other transactions in connection therewith (including any incurrence of Indebtedness and the use of proceeds thereof) have been consummated.  For purposes of any calculation pursuant to this Section 1.7 of the Consolidated Fixed Charge Coverage Ratio, clause (a) of the definition of Consolidated Fixed Charges may be calculated using an assumed interest rate for the Indebtedness to be incurred in connection with such Limited Condition Transaction based on the indicative interest margin contained in any financing commitment documentation with respect to such Indebtedness or, if no such indicative interest margin exists, as reasonably determined by the Borrower in good faith.
(p)    In Section 2.2 the following sentence is added to the end thereof to read as follows:

On the Second Amendment Effective Date, (i) Twenty-Two Million Nine Hundred Sixty-Eight Thousand Seven Hundred Fifty Dollars ($22,968,750) of Delayed Draw Term Loans shall be converted to outstanding Revolving Loans, (ii) Twelve Million Thirty-One Thousand Two Hundred Fifty Dollars ($12,031,250) of Term Loan A shall be converted to outstanding Revolving Loans, and (iii) after giving effect to such conversions in clauses (i) and (ii) above, the aggregate outstanding principal amount of Revolving Loans is Fifty-Five Million Dollars ($55,000,000). 

(q)    Section 2.16 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Section 2.16    Inability to Determine Interest Rates.  
(a)    If prior to the commencement of any Interest Period for any Eurodollar Borrowing,
(i)    the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower absent manifest error) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining LIBOR (including, without limitation, because the Screen Rate is not available or published on a current basis) for such Interest Period, or
(ii)    the Administrative Agent shall have received notice from the Required Lenders that the Adjusted LIBO Rate does not adequately and fairly reflect the cost to such Lenders (or Lender, as the case may be) of making, funding or maintaining their (or its, as the case may be)  Eurodollar Loans for such Interest Period,
the Administrative Agent shall give written notice (or telephonic notice, promptly confirmed in writing) to the Borrower and to the Lenders as soon as practicable thereafter.  Until the Administrative Agent shall notify the 

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Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) the obligations of the Lenders to make Eurodollar Revolving Loans or to continue or convert outstanding Loans as or into Eurodollar Loans shall be suspended and (ii) all such affected Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto unless the Borrower prepays such Loans in accordance with this Agreement.  Unless the Borrower notifies the Administrative Agent at least one (1) Business Day before the date of any Eurodollar Borrowing for which a Notice of Revolving Borrowing or Notice of Conversion/Continuation has previously been given that it elects not to borrow, continue or convert to a Eurodollar Borrowing on such date, then such Revolving Borrowing shall be made as, continued as or converted into a Base Rate Borrowing.
(b)    If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (a)(i) above have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in clause (a)(i) above have not arisen but the supervisor for the administrator of the Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the Screen Rate shall no longer be used for determining interest rates for loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to the Screen Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Margin).  Notwithstanding anything to the contrary in Section 11.2, such amendment shall become effective without any further action or consent of any other party to this Agreement so long as the Administrative Agent shall not have received, within five (5) Business Days of the date notice of such alternate rate of interest is provided to the Lenders, a written notice from the Required Lenders stating that such Required Lenders object to such amendment.  Until an alternate rate of interest shall be determined in accordance with this clause (b) (but, in the case of the circumstances described in clause (ii) of the first sentence of this Section 2.16(b), only to the extent the Screen Rate for the applicable currency and/or such Interest Period is not available or published at such time on a current basis), (x) any Notice of Conversion/Continuation that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (y) if any Notice of Revolving Borrowing or Notice of Swingline Borrowing requests a Eurodollar Borrowing, such Borrowing shall be made as a Base Rate Borrowing; provided, that, if such alternate rate of interest shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.

(r)    Section 2.23 of the Credit Agreement is hereby amended to:

(i)     restate clauses (a) and (b) thereof in their entirety to read as follows: 

(a)                So long as no Default or Event of Default has occurred and is continuing and the Borrower would be in pro forma compliance with the financial covenants set forth in Article VI after giving effect thereto, from time to time after the Second Amendment Effective Date, Borrower may, upon at least 15 days’ (or such shorter period of time as the Administrative Agent may agree in its sole discretion) written notice to the Administrative Agent, propose to increase the Aggregate Revolving Commitments or to establish one or more new additional term loans (each, an “Incremental Term Loan”) by an amount not to exceed the Incremental Amount (the amount of any such increase or the principal amount of any such Incremental Term Loan, the “Additional Commitment Amount”) and in a minimum amount of at least $3,000,000 or a larger multiple of $1,000,000.  With respect to any Incremental Term Loan, (x) the final maturity date shall be no earlier than the latest Maturity Date for any then existing Term Loan, (y) the weighted average life to maturity of such Incremental Term Loan shall not be shorter than the weighted average life to maturity of any then existing Term Loan and (z)  the Applicable Margin for the Incremental Term Loan shall not be more than 75 basis points (0.75%) more than the Applicable Margin with respect to any then existing Term Loan, unless the Applicable Margin for any then existing Term Loan is increased to the Applicable Margin for the Incremental Term Loan minus 75 basis points (0.75%).  For the avoidance of doubt, no Lender (or any successor thereto) shall have any obligation to increase its Revolving Commitment or its other obligations under this Agreement 

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and the other Loan Documents or provide any Incremental Term Loan Commitment, and any decision by a Lender to increase its Revolving Commitment or provide any Incremental Term Loan Commitment shall be made in its sole discretion independently from any other Lender.  

(b)    The allocations with respect to any increase to the Revolving Commitments or any Incremental Term Loan shall be determined by the Borrower. The Borrower may designate any bank or other financial institution (which may be, but need not be, one or more of the existing Lenders) which at the time agrees to, in the case of any such Person that is an existing Lender, increase its Revolving Commitment and/or provide an Incremental Term Loan Commitment, as applicable, and in the case of any other such Person (an “Additional Lender”), become a party to this Agreement; provided, however, that any new bank or financial institution must be reasonably acceptable to the Administrative Agent, which acceptance will not be unreasonably withheld or delayed.  The sum of the increases in the Revolving Commitments and/or the principal amount of Incremental Term Loans of the existing Lenders pursuant to this subsection (b) plus the Revolving Commitments and/or the principal amount of Incremental Term Loans of the Additional Lenders shall not in the aggregate exceed the unsubscribed amount of the Additional Commitment Amount.

(ii)    add the following language at the end of clause (e):
    
Each of the parties hereto acknowledges and agrees that, if there are any Mortgaged Properties, any increase, extension or renewal of any of the Commitments or Loans (including pursuant to Section 2.23 or any other incremental credit facilities hereunder, but excluding (i) any continuation or conversion of borrowings, (ii) the making of any Revolving Loans or (iii) the issuance, renewal or extension of Letters of Credit) shall be subject to (and conditioned upon): (1) the prior delivery of all flood hazard determination certifications, acknowledgements and evidence of flood insurance and other flood-related documentation with respect to such Mortgaged Properties as required by Flood Insurance Laws and as otherwise reasonably required by the Administrative Agent and (2) the Administrative Agent shall have received written confirmation from the Lenders that flood insurance due diligence and flood insurance compliance has been completed by the Lenders (such written confirmation not to be unreasonably withheld, conditioned or delayed).

(s)    Section 4.11 of the Credit Agreement is hereby amended to add the following clause (e) immediately following clause (d):

With respect to each Mortgaged Property that is located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a “special flood hazard area” with respect to which flood insurance has been made available under Flood Insurance Laws, the applicable Loan Party (A) has obtained and will maintain, with financially sound and reputable insurance companies (except to the extent that any insurance company insuring the Mortgaged Property of the Loan Party ceases to be financially sound and reputable after the Closing Date, in which case, the Borrower shall promptly replace such insurance company with a financially sound and reputable insurance company), such flood insurance in such reasonable total amount as the Administrative Agent and the Lenders may from time to time reasonably require, and otherwise sufficient to comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and (B) promptly upon request of the Administrative Agent or any Lender, will deliver to the Administrative Agent or such Lender as applicable, evidence of such compliance in form and substance reasonably acceptable to the Administrative Agent and such Lender, including, without limitation, evidence of annual renewals of such insurance.

(t)    Section 5.12 of the Credit Agreement is hereby amended by adding the phrase “, any Lender, or any Affiliate of any Lender” after the first reference to the “Administrative Agent” in Section 5.12(a).

(u)    Section 5.13 of the Credit Agreement is hereby amended to add the following language at the end of clause (b) thereof:

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Notwithstanding the foregoing, the Administrative Agent shall not enter into any Mortgage in respect of any real property acquired by any Loan Party after the Closing Date until (1) the date that occurs 45 days after the Administrative Agent has delivered to the Lenders (which may be delivered electronically) the following documents in respect of such real property: (i) a completed flood hazard determination from a third party vendor; (ii) if such real property is located in a “special flood hazard area”, (A) a notification to the Borrower of that fact and (if applicable) notification to the Borrower  that flood insurance coverage is not available and (B) evidence of the receipt by the Borrower of such notice; and (iii) if such notice is required to be provided to the Borrower and flood insurance is available in the community in which such real property is located, evidence of required flood insurance and (2) the Administrative Agent shall have received written confirmation from the Lenders the that flood insurance due diligence and flood insurance compliance has been completed by the Lenders (such written confirmation not to be unreasonably conditioned, withheld or delayed).

(v)    Section 6.2 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

Section 6.2    Consolidated Leverage Ratio.  The Parent and its Subsidiaries on a consolidated basis will maintain, as of the end of each Fiscal Quarter, commencing with the Fiscal Quarter ending on June 30, 2019, a Consolidated Leverage Ratio of not greater than:
	
		
	Fiscal Quarter
	Consolidated Leverage Ratio

	Each Fiscal Quarter ending 
prior to September 30, 2020
	3.00:1.0

	Fiscal Quarter ending September 30, 2020 and each Fiscal Quarter ending prior to September 30, 2021
	2.75:1.0

	Fiscal Quarter ending September 30, 2021 and each Fiscal Quarter ending thereafter
	2.50:1.00

; provided that, the maximum Consolidated Leverage Ratio permitted to be maintained pursuant to this Section 6.2 shall increase by (i) 0.50 for the Fiscal Quarter in which a Qualified Acquisition has occurred and for the subsequent Fiscal Quarter and (ii) 0.25 for the third and fourth Fiscal Quarters after which a Qualified Acquisition has occurred; provided further, that, in no event shall the maximum Consolidated Leverage Ratio permitted under this Section 6.2 exceed 3.25:1.00 as the result of any such “step-up” provided for herein.

(w)    Section 7.1(g) of the Credit Agreement is hereby amended to delete the phrase “not to exceed $4,000,000 of new Indebtedness in any one Fiscal Year, and”.

(x)    In Section 7.1(t) of the Credit Agreement, the reference to “$7,500,000” is hereby replaced with a reference to “$15,000,000”.

(y)    In Section 7.2(u) of the Credit Agreement, the reference to “$5,000,000” is hereby replaced with a reference to “$7,500,000”.

(z)    In Section 7.4(s) of the Credit Agreement, the reference to “$8,000,000” is hereby replaced with a reference to “$15,000,000”.

(aa)    In Section 7.5(j) of the Credit Agreement, the reference to “$6,000,000” is hereby replaced with a reference to “$10,000,000”.

(bb)    In Section 7.6(n) of the Credit Agreement, the reference to “$5,000,000” is hereby replaced with a reference to “$10,000,000”.

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(cc)    In Sections 8.1(k) and (l) of the Credit Agreement, each reference to “$7,500,000” is hereby replaced with a reference to “$15,000,000”.

(dd)    Section 11.2 of the Credit Agreement is hereby amended by adding the phrase “or Revolving Commitment Termination Date” after the first reference to “Maturity Date” in the penultimate paragraph thereof.

4.    Conditions Precedent to Effectiveness of Amendment.  This Amendment shall become effective as of the date hereof (the “Effective Date”) upon satisfaction (or waiver by each Lender and each Incremental Lender) of each of the following conditions precedent:

(a)    Amendment.  Receipt by the Administrative Agent of counterparts of this Amendment executed by the Borrower, the Parent, the Guarantors, the Required Lenders, each Incremental Lender (including the New Lender) and the Administrative Agent. 

(b)    Organizational Documents; Resolutions and Certificates.  Receipt by the Administrative Agent of:

(i)    a certificate of the Secretary or Assistant Secretary of each Loan Party, attaching and certifying copies of such Loan Party’s Organizational Documents and resolutions of its board of directors (or equivalent governing body), authorizing the execution, delivery and performance of this Amendment and certifying the name, title and true signature of each officer of such Loan Party executing this Amendment; and

(ii)    certified copies of the articles or certificate of incorporation, certificate of organization or limited partnership, or other registered organizational documents of each Loan Party, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of organization of such Loan Party.

(c)    Opinions of Counsel.  Receipt by the Administrative Agent of favorable written opinions of counsel to the Loan Parties addressed to the Administrative Agent and each of the Incremental Lenders regarding, among other things, the binding effect and enforceability of this Amendment and otherwise in form and substance reasonably satisfactory to the Administrative Agent.

(d)    Fees and Expenses.  All fees required to be paid on the date hereof and all reasonable out-of-pocket expenses required to be paid on the date hereof, to the extent invoiced at least one Business Day prior to the date hereof, shall have been paid.

(e)    Officer’s Closing Certificate.  Receipt by the Administrative Agent of a certificate, dated as of the Effective Date and signed by a Responsible Officer certifying on behalf of the Loan Parties that (i) after giving effect to the funding of the initial Borrowing under the Incremental Revolving Commitments on the Effective Date (A) no Default or Event of Default shall have occurred and be continuing, (B) the Loan  Parties are in compliance with the financial covenants set forth in Sections 6.1 and 6.2 of the Credit Agreement, on a Pro Forma Basis, recomputed as of the end of the period of the four Fiscal Quarters most recently ended for which the Borrower has delivered financial statements under the Credit Agreement and (C) all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality, in which case such representations and warranties shall be true and correct in all respects, on and as of the Effective Date) except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date and (ii) each Loan Party is Solvent before and after giving effect to the any Borrowing under the Incremental Revolving Commitments on the Effective Date and the consummation of the other transactions contemplated herein.

For purposes of determining whether the conditions set forth in this Section 4 have been satisfied, by releasing its signature page hereto, each Incremental Lender shall be deemed to have consented to, approved, accepted or be 

9

satisfied with each document or other matter required hereunder to be consented to or approved by, or acceptable or satisfactory to, such Incremental Lender.

5.    New Lender Joinder.  Bank of America, N.A. (the “New Lender”), the other Lenders, the Administrative Agent and the Loan Parties acknowledge, agree and confirm that the New Lender shall from and after the Second Amendment Effective Date be deemed to be a party to the Credit Agreement, and a “Lender” for all purposes of the Credit Agreement and the other Loan Documents, and shall have all of the rights and obligations of a Lender under the Credit Agreement and the other Loan Documents.  The New Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Amendment and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii)  from and after the Second Amendment Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and shall have the obligations of a Lender thereunder and (iii) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.1(a) and (b) thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender; (b) agrees that (i) it will, independently and without reliance on the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; and (c) hereby irrevocably appoints SunTrust Bank as Administrative Agent under the Credit Agreement and the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are incidental thereto.

6.    Representations and Warranties; No Default. Each Loan Party represents and warrants that after giving effect to this Amendment (a) the representations and warranties made by the Loan Parties in each Loan Document are true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality, in which case such representations and warranties are true and correct in all respects) on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case such representations and warranties are true and correct in all material respects as of such earlier date, and (b) no Default or Event of Default has occurred and is continuing or would result from the initial Borrowing under the Incremental Revolving Commitments.

7.    Reaffirmation of Obligations.  Each Loan Party (a) acknowledges and consents to all of the terms and conditions of this Amendment, (b) affirms all of its obligations under the Loan Documents and (c) agrees that this Amendment and all documents executed in connection herewith do not operate to reduce or discharge such Loan Party’s obligations under the Loan Documents.

8.    Reaffirmation of Security Interests.  Each Loan Party (a) affirms that each of the Liens granted in or pursuant to the Loan Documents are valid and subsisting and (b) agrees that this Amendment shall in no manner impair or otherwise adversely affect any of the Liens granted in or pursuant to the Loan Documents.

9.    Loan Document.  This Amendment is a Loan Document and all references to a “Loan Document” in the Credit Agreement and the other Loan Documents (including, without limitation, all such references in the representations and warranties in the Credit Agreement and the other Loan Documents) shall be deemed to include this Amendment.

10.    No Other Changes.  Except as modified hereby, all of the terms and provisions of the Loan Documents shall remain in full force and effect.

11.    Counterparts; Delivery.  This Amendment may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of this Amendment by facsimile or other electronic imaging means shall be effective as an original.

10

12.    Governing Law.  This Amendment shall be deemed to be a contract made under, and for all purposes shall be construed in accordance with and be governed by the Law (without giving effect to the conflict of law principles thereof except for Sections 5-1401 and 5-1402 of the New York General Obligations Law) of the State of New York.

[SIGNATURE PAGES FOLLOW]

11

IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Second Incremental Facility Amendment and Second Amendment to Second Amended and Restated Credit Agreement to be duly executed and delivered as of the date first written above.

BORROWER:                    
MALIBU BOATS, LLC,
a Delaware limited liability company

By:    /s/ Wayne Wilson
Name:  Wayne Wilson
Title: Chief Financial Officer
PARENT:                
MALIBU BOATS HOLDINGS, LLC,
a Delaware limited liability company

By:    /s/ Wayne Wilson
Name:  Wayne Wilson
Title: Chief Financial Officer
GUARANTORS:                
MALIBU AUSTRALIAN ACQUISITION CORP.,
a Delaware corporation

By:    /s/ Wayne Wilson    
Name: Wayne Wilson
Title: Secretary and Treasurer
COBALT BOATS, LLC,
a Delaware limited liability company

By:    /s/ Wayne Wilson    
Name: Wayne Wilson
Title: Chief Financial Officer
PB HOLDCO, LLC,
a Delaware limited liability company

By:    /s/ Wayne Wilson    
Name: Wayne Wilson
Title: Chief Financial Officer
[SIGNATURE PAGES CONTINUE]

12

ADMINISTRATIVE AGENT:    
SUNTRUST BANK, as Administrative Agent

By:    /s/ James Ford    
Name: James Ford
Title: Managing Director

[SIGNATURE PAGES CONTINUE]

13

LENDERS AND
INCREMENTAL LENDERS:        
SUNTRUST BANK, as a Lender and an Incremental Lender

By:    /s/ James Ford    
Name: James Ford
Title: Managing Director

JP MORGAN CHASE BANK, N.A., as a Lender and an Incremental Lender

By:    /s/ Rob Villas    
Name: Rob Villas
Title: Authorized Officer

FIRST TENNESSEE BANK NATIONAL ASSOCIATION, as a Lender and an Incremental Lender

By:    /s/ Amy Avery    
Name: Amy Avery
Title: Senior Vice President

REGIONS BANK, as a Lender and an Incremental Lender

By:    /s/ Brand Hosford    
Name: Brand Hosford
Title: Vice President

BANK OF AMERICA, N.A., as a Lender and an Incremental Lender

By:    /s/ John M. Hall    
Name: John M. Hall
Title: Senior Vice President

WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender and an Incremental Lender

By:    /s/ Nicole Harrell
Name: Nicole Harrell
Title: Vice President

[SIGNATURE PAGES CONTINUE]

14

UNITED COMMUNITY BANK, as a Lender and an Incremental Lender

By:    /s/ Jeff Wilson    
Name: Jeff Wilson
Title: Vice President

15

SCHEDULE I

Schedule I

COMMITMENT AMOUNTSex_143028.htm

 

Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), effective this 27th day of January 2018 (“Effective Date”), is made and entered into between TSS, INC., a Delaware corporation (the “Company”), and KIERAN BRENNAN (the “Executive”).

 

NOW, THEREFORE, in exchange for the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Executive, each intending to be legally bound, hereby mutually covenant and agree as follows:

 

	
			 

				
			1.

				
			DEFINITIONS

			

 

The following words and terms shall have the meanings set forth below for the purposes of this Agreement:

 

1.1. Affiliates. “Affiliates” of a Person, or a Person “affiliated” with another Person, are any Persons which, directly or indirectly, through one or more intermediaries, controls or are controlled by or are under common control with, the Person specified.

 

1.2. Board. “Board” means the Company’s Board of Directors.

 

1.3. Cause. The following constitutes “Cause” giving rise to the Company’s right to terminate the Executive’s employment under Section 5.1 of this Agreement: (a) the Executive’s willful failure to perform, or gross negligence in the performance of, his duties and responsibilities to the Company and its Affiliates; (b) any act that would constitute a material violation of the Company’s material written policies; (c) intentionally engaging in conduct materially and demonstrably injurious to the Company; (d) conviction of (1) a crime of embezzlement or a crime involving moral turpitude; (2) a crime with respect to the Company involving a breach of trust or dishonesty; or (3) in either case, a plea of guilty or no contest to such a crime; or (e) the Executive’s violation of his obligations under the Assignment Agreement (as defined in Section 6 of this Agreement) or under Sections 2.4 or 7 of this Agreement or by his breach of a fiduciary duty owed the Company or any of its Affiliates.

 

1.4. Change in Control of the Company. “Change in Control of the Company” means (a) a sale, transfer or exclusive licensing by the Company of all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis (measured by either book value in accordance with United States generally accepted accounting principles consistently applied or fair market value determined in the reasonable good faith judgment of the Board) in any transaction or series of related transactions (other than sales in the ordinary course of business); (b) any sale, transfer or issuance or series of sales, transfers and/or issuances of shares of the Company’s capital stock by the Company or any holders thereof that results in any Person or Persons acting as a “group” (as such term is used under Section 13(d)(3) of the Securities Exchange Act of 1934), other than the holders of Company’s capital stock as of the date hereof, owning directly or indirectly capital stock of the Company possessing more than 50% of the combined voting power (under ordinary circumstances) in the election of the Board; (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (d) the stockholders of the Corporation approve a plan of complete liquidation of the Company.

 

 

 

 

1.5. Date of Termination. “Date of Termination” means (a) if the Executive’s employment is terminated by reason of the Executive’s death, the date of the Executive’s death, or (b) if the Executive’s employment with the Company is terminated for any reason other than the Executive’s death, the date on which Executive ceases to be an employee of the Company.

 

1.6. Disability. Termination of the Executive’s employment with the Company based on “Disability” means termination of the Executive’s employment at the Company’s sole discretion, upon thirty (30) days prior written notice in the event the Executive becomes “Disabled,” as defined in any group term disability insurance maintained by the Company applicable to the Executive, or, (b) if the Company shall not maintain such insurance, the determination by an independent physician acting reasonably and in good faith that the Executive is incapacitated by reason of a physical or mental illness that is long-term in nature and that prevents the Executive from performing the substantial and material duties of his employment with the Company, provided that such incapacity can reasonably be expected to prevent the Executive from working at least six (6) months in any twelve (12) month period. The Company may require the Executive to have the examination described in the preceding sentence at any time for the purpose of determining whether the Executive has a long-term disability, and the Executive agrees to submit to such examination upon request of the Board; provided that the Company shall pay all costs and expenses associated with such examination. This Section 1.6 shall be interpreted and applied consistently with the Americans with Disabilities Act, the Family and Medical Leave Act and other applicable law.

 

1.7. Good Reason. Termination of the Executive’s employment by the Executive for a “Good Reason” shall mean termination by the Executive because of: (a) failure of the Company to pay any installment of the Executive’s Base Salary when such installment is due pursuant to this Agreement, which failure is not cured within fifteen (15) days; (b) any other breach or breaches of this Agreement by the Company, which breaches are, singularly or in the aggregate, material, and which are not cured within thirty (30) days of written notice of such breach or breaches to the Company by the Executive; or (c) a reduction by the Company of the Executive’s Base Salary without the express written consent of the Executive.

 

1.8. Person. “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity and a governmental entity or any department, agency or political subdivision thereof.

 

2

 

 

1.9. Restrictive Period. “Restrictive Period” means the nine (9) month period measured from the Termination Date through the date that is nine (9) months following the Date of Termination.

 

1.10. Subsidiary. “Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity.

 

	
			 

				
			2.

				
			EMPLOYMENT

			

 

2.1. Employment Period.

 

2.1.1 The Company hereby employs the Executive, and the Executive hereby accepts said employment and agrees to render services to the Company, on the terms and conditions set forth in this Agreement for the period commencing on the Effective Date and ending on December 31, 2018 (the “Expiration Date ”), unless sooner terminated in accordance with the provisions herein (such period is the “Employment Period”); provided, however, that if this Agreement is renewed pursuant to Section 2.1.2 of this Agreement, then the “Expiration Date” for the then current “Renewal Term” (as hereinafter defined) shall be the date that is last day of the one year period of any Renewal Term.

 

2.1.2 This Agreement shall be automatically renewed for an additional one year period commencing at the expiration of the initial Employment Period or any subsequent renewal term (each, a “Renewal Term”) unless the Company provides written notice of termination to the Executive not less than thirty (30) days prior to the Expiration Date. Notwithstanding the foregoing or anything else in this Agreement to the contrary, the Employment Period shall immediately terminate prior to any Expiration Date (i) upon Executive’s death, Disability or termination for a Good Reason or (ii) upon termination by the Company for Cause. In all other circumstances, thirty (30) days’ prior written notice is required by either party to the other to terminate this Agreement.

 

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2.2. Duties. During the Employment Period, the Executive shall have the title Senior Vice President of Sales and Marketing and shall report to the Company’s Chief Executive Officer. The Executive shall perform such services for the Company as is consistent with the Executive’s position (subject to the power and authority of the Board to expand or limit such services and to overrule actions of officers of the Company) and as lawfully directed, from time to time, by the Company’s Chief Executive Officer or the Board. The Executive shall devote the Executive’s full working time and attention and use the Executive’s best efforts and skill to the performance of the Executive’s duties under this Agreement. The Executive shall not, during the Employment Period, provide services to any business activity for gain, profit or other pecuniary advantage other than the services provided under this Agreement. Notwithstanding the foregoing, the Executive may (a) volunteer services for or on behalf of such religious, educational, non-profit and/or other charitable organization as the Executive may wish to serve, (b) manage his personal, financial and legal affairs, or (c) with the consent of the Board, which shall not be unreasonably withheld, serve on up to two (2) boards of directors of other entities, so long as the activities described in the foregoing clauses (a) through (c) do not interfere with the performance of his duties and responsibilities to the Company as provided hereunder or violate any of the terms of this or any other agreement entered into with the Company. The Executive acknowledges that the Executive may be required to travel on business in connection with the Executive’s performance of the Executive’s duties hereunder.

 

2.3. Insurance. The Company may, at its discretion, apply for and procure in its own name and for its own benefit life and/or disability insurance on the Executive in any amount or amounts considered available. The Executive agrees to cooperate in any medical or other examination, supply any information and execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. The Executive hereby represents that the Executive has no reason to believe that the Executive’s life is not insurable at rates now prevailing for a healthy person of the Executive's gender and age.

 

2.4. Corporate Opportunity. The Executive agrees that, unless approved by the Board, he will not take personal advantage of any business opportunities that arise during his employment with the Company and that may be of benefit to the Company. All material facts regarding such opportunities must be promptly reported to the Board for consideration by the Company in accordance with the Company’s policies.

 

	
			 

				
			3.

				
			COMPENSATION AND BENEFITS

			

 

3.1. Base Salary. During the Employment Period, the Company shall pay the Executive an initial base salary of Two Hundred and Fifty Thousand Dollars ($250,000.00) per year (“Base Salary”) paid in approximately equal installments bi-weekly.

 

3.2. Annual Bonus. For each calendar year that begins during the Employment Period (each such calendar year, a “Bonus Year”), the Executive shall be eligible to receive a bonus in an amount and on such terms as are established by the Board in its sole discretion. Without limiting the generality of the foregoing, the Executive’s target annual bonus for the 2018 Bonus Year shall equal 50% of the Base Salary on terms established by the Board for such Bonus Year. Any bonus for an applicable calendar year, or portion thereof, shall be paid to the Executive no later than March 15th of the calendar year following the Bonus Year.

 

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3.3. Vacation and Benefits. The Executive shall receive vacation, health insurance and other employee benefits as the Company makes available to other executives, as may exist at any particular time and from time to time during the Executive’s employment. All matters of eligibility for coverage or benefits under any health, hospitalization, life, disability, or other insurance plan, program or policy shall be determined in accordance with the provisions of the plan, program, or policy; and the Company shall not be liable to the Executive, the Executive’s family, heirs, executors, or beneficiaries for any payment payable or claimed to be payable under any such benefit plan, program, or policy.

 

3.4. Withholding. All payments required to be made by the Company hereunder to the Executive shall be subject to the withholding of such amounts, if any, relating to tax and other payroll deductions as the Company may reasonably determine should be withheld pursuant to any applicable law or regulation.

 

3.5. Policies, Procedures & Benefit Plans. Except as otherwise provided herein, the Executive’s employment shall be subject to the policies and procedures that apply generally to the Company’s employees as the same may be interpreted, adopted, revised or deleted from time to time, during the Employment Period, by the Board in its sole discretion. The Executive agrees to comply with such policies and procedures in all material respects.

 

3.7. Equity. On the Effective Date, the Executive shall receive options to purchase 250,000 shares of the Company’s common stock and 200,000 shares of restricted stock upon the terms and conditions set forth in that certain Award Agreement, dated as of the Effective Date, between the Company and the Executive.

 

	
			 

				
			4.

				
			EXPENSES

			

 

4.1. Expenses. During the Employment Period, including following any Date of Termination for appropriate expenses incurred on or prior to the Date of Termination, the Company shall reimburse the Executive promptly or otherwise provide for or pay for all pre-approved reasonable expenses incurred by the Executive in furtherance of, or in connection with, the business of the Company or its Subsidiaries, consistent with the Company’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to such reasonable documentation and other limitations as may be established from time to time by the Board, including against presentation of vouchers or receipts therefor.

 

	
			 

				
			5.

				
			TERMINATION

			

 

5.1. Termination Due to Death or Disability, By the Company For Cause or By the Executive. If the Employment Period is terminated (a) by reason of the Executive’s Death or Disability; (b) by the Company for Cause; (c) by the Executive (other than for a Good Reason); or (d) (subject to Section 5.2 with respect to COBRA benefits) by the Company or the Executive for any reason before the first anniversary of the Effective Date; then the Executive shall only be entitled to receive the Executive’s Base Salary and the reimbursement of any applicable expenses pursuant to Section 4 of this Agreement through the Date of Termination, and the Executive shall have no right to any other compensation thereafter (including without limitation pursuant to Section 3.1 and Section 3.2 of this Agreement, but not including Section 5.4 of this Agreement). No Person shall be entitled hereunder to participate in any employee benefit plan after the Date of Termination if the Employment Period is terminated in connection with this Section 5.1, except as otherwise expressly required by applicable law (i.e., COBRA) and provided that nothing herein shall be interpreted to limit the Executive’s conversion rights, if any, under any of the Company’s employee benefit plans.

 

5

 

 

5.2. Termination By the Company Other Than for Cause or By the Executive for a Good Reason. In addition to the payment to the Executive of the Executive’s Base Salary and the reimbursement of any applicable expenses pursuant to Section 4 of this Agreement through the Date of Termination, if (a) after the first anniversary of the Effective Date the Employment Period is terminated (i) by the Company other than for Cause, (ii) by the Executive for a Good Reason, or (iii) by the Company in accordance with Section 2.1.2 of this Agreement by providing the requisite notice to the Executive to terminate this Agreement prior to any Expiration Date; and (b) the Executive executes a general release in substantially the form attached hereto as Exhibit A (the “Release”) on or before the Date of Termination; and (c) the Executive has not breached the terms of the “Assignment Agreement” (as defined below); then the Company shall continue paying the Executive salary payments based on the Base Salary (at the rate in effect at the Date of Termination) for a period commencing on the Date of Termination and ending six (6) months from the Date of Termination. Any payment under this Section 5.2 shall be made in accordance with the Company’s normal payroll schedule at the time the payments are made. The Executive shall be entitled to receive the benefits under any plan or program adopted or sponsored by the Company or its Subsidiaries (to the extent the Executive participates and is vested in such benefits) in accordance with the terms of such plan or program. If the Executive elects and remains eligible for health coverage pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (“COBRA”) (and subject to withholding pursuant to Section 3.5 of this Agreement), then commencing within fifteen (15) business days following the date on which the Release becomes effective pursuant to its terms, the Company will, for a period commencing on the Date of Termination and ending (X) three (3) months from the Date of Termination if the Date of Termination occurs on or before the first anniversary of the Effective Date or (Y) six (6) months from the Date of Termination if the Date of Termination occurs after the first anniversary of the Effective Date, pay a percentage of the premium for such COBRA health coverage equal to the percentage of the premium for health insurance coverage paid by the Company on the Date of Termination. The Executive shall not be entitled to any other salary or compensation after termination of the Employment Period under this Section 5.2 (other than as set forth in this Section 5.2 and Section 5.4 of this Agreement). No Person shall be entitled hereunder to participate in any employee benefit plan after the Date of Termination if the Employment Period is terminated in connection with this Section 5.2, except as otherwise specifically provided hereunder or as required by applicable law (i.e., COBRA) and provided that nothing herein shall be interpreted to limit the Executive’s conversion rights, if any, under any of the Company’s employee benefit plans.

 

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5.3. Termination following a Change in Control of the Company. In addition to the payment to the Executive of the Executive’s Base Salary and the reimbursement of any applicable expenses pursuant to Section 4 of this Agreement through the Date of Termination, if (a) the Employment Period is terminated within twelve (12) months following a Change in Control of the Company; and (b) the Executive executes the Release on or before the Date of Termination; and (c) the Executive has not breached the terms of the “Assignment Agreement” (as defined below); then the Company shall continue paying the Executive salary payments based on the Base Salary (at the rate in effect at the Date of Termination) for a period commencing on the Date of Termination and ending twelve (12) months from the Date of Termination. Any payment under this Section 5.3 shall be made in accordance with the Company’s normal payroll schedule at the time the payments are made. The Executive shall be entitled to receive the benefits under any plan or program adopted or sponsored by the Company or its Subsidiaries (to the extent the Executive participates and is vested in such benefits) in accordance with the terms of such plan or program. If the Executive elects and remains eligible for health coverage pursuant to COBRA (and subject to withholding pursuant to Section 3.5 of this Agreement), then commencing within fifteen (15) business days following the date on which the Release becomes effective pursuant to its terms, the Company will, for a period commencing on the Date of Termination and ending twelve (12) months from the Date of Termination, pay a percentage of the premium for such COBRA health coverage equal to the percentage of the premium for health insurance coverage paid by the Company on the Date of Termination. The Executive shall not be entitled to any other salary or compensation after termination of the Employment Period under this Section 5.3 (other than as set forth in this Section 5.3 and Section 5.4 of this Agreement). No Person shall be entitled hereunder to participate in any employee benefit plan after the Date of Termination if the Employment Period is terminated in connection with this Section 5.3, except as otherwise specifically provided hereunder or as required by applicable law (i.e., COBRA) and provided that nothing herein shall be interpreted to limit the Executive’s conversion rights, if any, under any of the Company’s employee benefit plans.

 

5.4. Cooperation with Company after Termination of Employment. For a period of six (6) months following termination of the Employment Period for any reason, as such period may be extended with the consent of the Executive, the Executive shall fully cooperate with the Company in all matters relating to the winding up of pending work on behalf of the Company including, but not limited to, any litigation in which the Company is involved, and the orderly transfer of any such pending work to other executives of the Company as may be designated by the Company. The Executive shall be compensated for any time spent pursuant to this Section 5.4 at the specific request of the Company at a per diem amount based upon the Executive’s Base Salary at the Date of Termination.

 

5.5. Termination by Mutual Consent. Notwithstanding any of the foregoing provisions of this Section 5, if at any time during the course of this Agreement the parties by mutual consent decide to terminate the Employment Period, they shall do so by separate agreement setting forth the terms and conditions of such termination.

 

5.6. Section 409A. Notwithstanding any other provision with respect to the timing of payments under Section 5.2 of this Agreement, if, at the time of the Executive’s termination, the Executive is deemed to be a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code (the “Code”), and any successor statute, regulation and guidance thereto) of the Company, then only to the extent necessary to comply with the requirements of Section 409A of the Code, any payments to which the Executive may become entitled under Section 5.2 of this Agreement that are subject to Section 409A of the Code (and not otherwise exempt from its application) will be withheld until the first business day of the seventh month following the Date of Termination, at which time the Executive shall be paid an aggregate amount equal to six months of payments otherwise due to the Executive under the terms of Section 5.2 of this Agreement, as applicable. After the first business day of the seventh month following the date of termination and continuing each month thereafter, the Executive shall be paid the regular payments otherwise due to the Executive in accordance with the terms of Section 5.2 of this Agreement, as thereafter applicable.

 

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			6.

				
			INVENTION, ASSIGNMENT AND CONFIDENTIALITY AGREEMENT

			

 

6.1. Assignment Agreement. The parties hereto have entered into an Invention Assignment and Confidentiality Agreement attached hereto as Exhibit B (the “Assignment Agreement”), which may be amended by the parties from time to time pursuant to the terms thereof. The provisions of the Assignment Agreement are intended by the parties to survive, and shall survive, the termination or expiration of the Employment Period and this Agreement.

 

 

	
			 

				
			7.

				
			NON-SOLICITATION OF CUSTOMERS OR EMPLOYEES; NON-COMPETITION

			

 

7.1. Covenant Not-to-Solicit Customers. During the Employment Period and the Restrictive Period, the Executive shall not directly or indirectly, individually or on behalf of any Person, whether as principal, agent, stockholder, employee, consultant, representative or in any other capacity, that engages in a Competitive Activity (as defined below) in any geographic area in which the Company actively markets or in which the Executive knows the Company intends to actively market, solicit any Person that:

 

(a) is a customer or client of the Company or any of its Subsidiaries that the Executive had dealings with by virtue of the Executive’s employment with the Company as of the Date of Termination;

 

(b) has been a customer or client of the Company or any of its Subsidiaries that the Executive had dealings with by virtue of the Executive’s employment with the Company at any time within two (2) years prior to the Date of Termination; or

 

(c) is a prospective customer or client that the Executive had been actively soliciting with, or on behalf of, the Company or any of its Subsidiaries as of the Date of Termination.

 

7.2. Covenant Not-to-Solicit Employees. During the Employment Period and the Restrictive Period, the Executive shall not directly or indirectly, individually or on behalf of any other Person, whether as principal, agent, stockholder, employee, consultant, representative or in any other capacity:

 

(a) recruit, solicit or encourage any person to leave the employ of the Company or any of its Subsidiaries; or

 

(b) hire any employee of the Company or any of its Subsidiaries as a regular employee, consultant, independent contractor or otherwise.

 

8

 

 

7.3. Non-Competition. The Executive recognizes and acknowledges the competitive and proprietary nature of the business operations of the Company and its Subsidiaries. During the Employment Period and the Restrictive Period, the Executive shall not, without the prior written consent of the Company, for himself or on behalf of any Person, directly or indirectly, whether as principal, agent, stockholder, employee, consultant, representative or in any other capacity, own, manage, operate or control, or be concerned, connected or employed by, or otherwise associate in any manner with, engage in or have a financial interest in any business that engages in a Competitive Activity in any geographic area in which the Company actively markets or in which the Executive knows the Company intends to actively market. For purposes of this Agreement, “Competitive Activity” means the design, development, manufacture, marketing, or sale of any product or service that is in competition with any product or service designed, developed, manufactured, marketed, or sold by the Company or any of its Subsidiaries on the Date or Termination or with respect to which the Company or its Subsidiaries has acquired or developed, prior to the Date of Termination, confidential information that it intends to use in the design, development, manufacture, marketing, or sale of a product or service. The parties acknowledge that the Company or its Subsidiaries may from time to time during the term of this Agreement change or increase the types of products or services it provides and its geographic markets, and this Agreement shall be deemed to be amended from time to time to include such different products, services, or geographic markets for the purposes of this Section 7.3. Nothing contained herein shall preclude the Executive from purchasing or owning stock in any such competitive business if such stock is publicly traded, and provided that his holdings do not exceed one percent (1%) of the issued and outstanding capital stock of such business.

 

7.4. Non-Disparagement. The Executive shall not make any public statement, or engage in any conduct, that is disparaging to the Company, or any of its employees, officers, directors or stockholders, including, but not limited to, any statement that disparages the products, services, finances, financial condition, capabilities or other aspects of the business of the Company. Notwithstanding any term to the contrary herein, the Executive shall not be in breach of this Section 7 for the making of any truthful statements under oath.

 

7.5. Reasonableness of Restrictions. The Executive has carefully read and considered the provisions of this Section 7, and, having done so, agrees (a) that the restrictions set forth herein are reasonable, in terms of scope, duration, geographic area, and otherwise, (b) that the protection afforded to the Company hereunder is necessary to protect its legitimate business interests, (c) that the agreement to observe such restrictions form a material part of the consideration for this Agreement and the Executive’s employment by the Company and (d) that upon the termination of the Executive’s employment with the Company for any reason, he will be able to earn a livelihood without violating the foregoing restrictions. In the event that, notwithstanding the foregoing, any of the provisions of this Section 7 shall be held to be invalid or unenforceable, the remaining provisions thereof shall nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts had not been included therein. In the event that any provision of this Section 7 relating to the time period and/or the areas of restriction and/or related aspects shall be declared by a court of competent jurisdiction to exceed the maximum restrictiveness such court deems reasonable and enforceable, the time period and/or areas of restriction and/or related aspects deemed reasonable and enforceable by the court shall become and thereafter be the maximum restriction in such regard, and the restriction shall remain enforceable to the fullest extent deemed reasonable by such court. The Restrictive Period shall be computed by excluding from such computation any time during which the Executive is in violation of any provision of this Section 7.

 

9

 

 

	
			 

				
			8.

				
			EXECUTIVE’S REPRESENTATIONS AND WARRANTIES

			

 

8.1. Other Agreements. The Executive hereby represents and warrants to the Company that the Executive is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other Person.

 

8.2. Enforceability. The Executive hereby represents and warrants to the Company that upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable in accordance with its terms.

 

8.3. No Breach; No Conflict of Interest. The Executive hereby represents and warrants to the Company that (a) the execution, delivery and performance of this Agreement by the Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a party or by which the Executive is bound and (b) the Executive is not, to the best of the Executive's knowledge and belief, involved in any situation that might create, or appear to create, a conflict of interest with loyalty to or duties for the Company.

 

8.4. Notification of Materials or Documents from Other Employers. The Executive hereby represents and warrants to the Company that the Executive has not brought and will not bring to the Company or use in the performance of responsibilities at the Company any materials or documents of a former employer or client that are not generally available to the public, unless the Executive has obtained express written authorization from the former employer or client and the Company for their possession and use.

 

8.5. Notification of Other Post-Employment Obligations. The Executive also understands that, as part of the Executive’s employment with the Company, the Executive is not to breach any obligation of confidentiality that the Executive has to former employers or clients, and agrees to honor all such obligations to former employers or clients during employment with the Company.

 

8.6. Consultation with Counsel. The Executive hereby acknowledges and represents that the Executive has consulted with independent legal counsel regarding the Executive’s rights and obligations under this Agreement and that the Executive fully understands the terms and conditions contained herein.

 

10

 

 

8.7. No Tax Guarantee. Payments or benefits under this Agreement are subject to any applicable employment or tax withholdings or deductions. It is the intention of the parties that all payments or benefits provided under this Agreement comply with Section 409A of the Code and this Agreement shall be interpreted accordingly. If it is determined that a provision is not compliant with Section 409A of the Code, the parties will, by mutual agreement, amend this Agreement as necessary to comply with Section 409A of the Code, provided however, that the Company will not be obligated to incur additional expense. Executive acknowledges that he has been advised to seek independent advice from his tax advisor(s) with respect to the application of Section 409A of the Code to any payments or benefits under this Agreement. Notwithstanding the foregoing, the Company does not guarantee the tax treatment of any payments or benefits under this Agreement, including without limitation under the Code, federal, state or local laws.

 

	
			  

				
			9.

				
			ARBITRATION

			

 

9.1. Claims. The Executive and the Company mutually consent to the resolution by arbitration of certain claims or controversies (collectively, “Claims”) arising out of or relating to the Executive’s employment or termination of employment under this Agreement that either party may have against the other, including the Company’s officers, stockholders, directors, employees, or benefit plans, the benefit plans’ sponsors, fiduciaries, administrators, or affiliates; and all successors and assigns of any of them, or agents in their capacity as such or otherwise. Claims covered by this Agreement shall include claims for (a) wages or other compensation due; (b) breach of any contract or covenant (express or implied); (c) tort claims; (d) discrimination (including but not limited to race, sex, religion, national origin, age, disability, citizenship, marital status, or any other basis protected by any applicable federal, state or local law); (e) payment of wages; (f) benefits (except where an employee benefit or pension plan specifies that its claims procedure shall use an arbitration procedure different from this one); and (g) violation of any federal, state, or local law, statute, regulation, or ordinance, or recognized under common law. The Claims not covered by this Agreement shall include claims (h) for workers’ compensation or unemployment compensation benefits; (i) brought pursuant to Sections 6 or 10 of this Agreement and breach of duty of loyalty; and (j) unrelated to the Employee’s employment with the Company.

 

9.2. Procedures. The arbitration shall be governed by the procedures of the American Arbitration Association in accordance with its then-current Model Employment Arbitration Procedures and shall take place in the Washington-Metropolitan area.

 

9.3. Legal Fees. If the parties to this Agreement become parties to an arbitration proceeding or litigation arising from or relating to this Agreement, the non-prevailing party shall pay the reasonable attorneys’ fees and costs incurred by the prevailing party in such arbitration or litigation.

 

	
			 

				
			10.

				
			GENERAL PROVISIONS

			

 

10.1. Assignment. The Company may assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any Person with or into which the Company may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its assets, if in any such case said Person shall by operation of law or expressly in writing assume all obligations of the Company hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder. The Executive may not assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the Company.

 

11

 

 

10.2. Notice. For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by certified or registered mail, return receipt requested, postage prepaid, or Federal Express, signature required, if to the Company, addressed to its corporate headquarters at the time notice is given, “Attention Board of Directors”; if to the Executive, addressed to his home address as listed in the Company’s records at the time notice is given.

 

10.3. Amendment and Waiver. No provision of this Agreement may be amended or waived unless such amendment or waiver is in writing and signed by each of the parties hereto. Any such amendment shall comply with the requirements of Section 409Aof the Code, if applicable.

 

10.4. Non-Waiver of Breach. No failure by either party to declare a default due to any breach of any obligation under this Agreement by the other, nor failure by either party to act quickly with regard thereto, shall be considered to be a waiver of any such obligation, or of any future breach.

 

10.5. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason and subject to Section 7.5 of this Agreement, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect.

 

10.6. Governing Law. To the extent not preempted by Federal law, the validity and effect of this Agreement and the rights and obligations of the parties hereto shall be construed and determined in accordance with the law of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.

 

10.7. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter, whether oral or written, which shall be null and void and of no further force or effect.

 

10.8. Binding Effect; Third Party Beneficiaries. This Agreement shall be binding upon and shall inure to the benefit of the transferees, successors and assigns of the Company, including without limitation any Person with which the Company may merge or consolidate. The Company’s Subsidiaries are express third party beneficiaries of this Agreement, including the provisions of Section 7 of this Agreement.

 

10.9. Headings. Numbers and titles to Sections hereof are for information purposes only and, where inconsistent with the text, are to be disregarded.

 

12

 

 

10.10. Survival. Section 1 and Sections 5 through 10 of this Agreement shall survive and continue in full force in accordance with their terms notwithstanding the expiration or termination of the Employment Period.

 

10.11. No Strict Construction. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

 

10.12. Counterparts. This Agreement may be executed in separate counterparts (including by means of facsimile), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

 

10.13. Indemnification of the Executive. The Company shall, to the extent permitted by the Bylaws of the Company, in a manner as applied to other officers of the Company, indemnify, protect and hold the Executive harmless from and against any expenses, including reasonable attorneys’ fees and expenses, claims, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding arising out of, or related to, the Executive's employment by the Company or any of its Subsidiaries. The Company shall cause the Executive to be covered under directors and officers liability insurance policies in reasonable amounts in accordance with the Company's standard corporate policies.

 

10.14. Injunctive Relief. The Executive represents and acknowledges that, in light of the payments to be made by the Company to the Executive hereunder and for other good and valid reasons, as a result of the restrictions stated in the Assignment Agreement and the restrictions in Section 7 of this Agreement, the Company and its Affiliates would sustain irreparable harm and, therefore, in addition to any other remedies which the Company or its Affiliates may have under this Agreement or otherwise, the Company shall be entitled to apply to any court of competent jurisdiction for an injunction restraining the Executive from committing or continuing any such violation of this Agreement, and the Executive shall not object to such application.

 

10.15. Section 409A and Tax Matters. This Agreement is intended to meet the requirements to avoid being subject to the additional taxes imposed on deferred compensation under Section 409A of the Code and shall be construed and interpreted in accordance with such intent. No person connected with the Agreement in any capacity, including but not limited to the Company and any Affiliate of the Company and their respective directors, officers, agents and employees, makes any representation, commitment or guarantee that any tax treatment, including but not limited to federal, state and local income, estate and gift tax treatment, will be applicable with respect to any amounts payable under the Agreement or that such tax treatment will apply to or be available to the Executive on account of participation in the Agreement. In no event whatsoever shall the Company or any Affiliate be liable for any additional tax, interest, or penalties that may be imposed on Executive as a result of Section 409A of the Code or any damages for failing to comply with Section 409A of the Code (other than for withholding obligations or other obligations applicable to employers, if any, under Section 409A of the Code).

 

[Signatures on next page]

 

13

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Executive Employment Agreement to be duly executed on the date and year first written above.

 

 

	
			THE COMPANY:

				 
	 	
			 

				 
	
			TSS, INC.

				 
	 	
			 

				 
	 	
			 

				 
	 	
			 

				 
	By:	
			  /s/Anthony Angelini                     

				 
	 	
			Anthony Angelini

				 
	 	
			Chief Executive Officer

				 
	 	
			 

				 
	 	
			 

				 
	
			THE EXECUTIVE:

				 
	 	
			 

				 
	 	
			 

				 
	 	
			 

				 
	
			  /s/ Kieran Brennan

				 
	
			Kieran Brennan

				 

 

14

 

 

EXHIBIT A

 

SEPARATION FROM EMPLOYMENT AGREEMENT AND RELEASE

 

1. This Separation from Employment Agreement and Release (this “Agreement”) is between the Executive, Kieran Brennan, the Executive’s spouse, family, agents and attorneys) (jointly, the “Executive”) and TSS, Inc. (the “Company”), its subsidiaries, affiliated entities, direct or indirect owners and its and their respective officers, directors, employees, agents, predecessors, successors, purchasers, assigns, representatives, fiduciaries, and insurers (jointly, the "Released Parties").

 

2. If the Executive signs this agreement and does not revoke it, the Executive will receive the applicable severance payments and benefits set forth in Section 5 of that certain Executive Employment Agreement, effective as of January 17, 2018 (the “Employment Agreement”).

 

3. The Executive, deeming this Agreement to be fair, reasonable, and equitable, and intending to be legally bound hereby, agrees to and hereby does, forever and irrevocably fully waive the Executive’s right to assert any and all forms of legal claims against the Released Parties, of any kind whatsoever, whether known or unknown, arising from the beginning of time through the date the Executive execute this Agreement (the “Execution Date”). Except as set forth below, the Executive’s waiver and release herein is intended to bar any form of legal claim, complaint or any other form of action (jointly referred to as “Claims”) against the Released Parties seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), the recovery of any damages, or any other form of monetary recovery whatsoever (including, without limitation, back pay, front pay, compensatory damages, emotional distress damages, punitive damages, attorneys’ fees and any other costs) against the Released Parties, for any alleged action, inaction or circumstance existing or arising through the Execution Date.

 

Without limiting the foregoing general waiver and release, the Executive specifically waives and releases the Released Parties from any Claim arising from or related to the Executive’s employment relationship with the Released Parties or the termination thereof, including, without limitation:

 

	
			 

				
			*

				
			Claims under any state or federal discrimination, fair employment practices or other employment related statute, regulation or executive order (as they may have been amended through the Execution Date) prohibiting discrimination or harassment based upon any protected status including, without limitation, race, national origin, age, gender, marital status, disability, veteran status or sexual orientation. Without limitation, specifically included in this paragraph are any Claims arising under the Civil Rights Acts of 1866 and 1871, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act and any similar Texas or other state statute.

			

 

 

 

 

	
			 

				
			*

				
			Claims under any other state or federal employment related statute, regulation or executive order (as they may have been amended through the Execution Date) relating to other terms and conditions of employment. Without limitation, specifically included in this paragraph are any Claims arising under the Employee Retirement Income Security Act of 1974, the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and any similar state statute.

			
	
			 

				
			*

				
			Claims under any state or federal common law theory including, without limitation, wrongful discharge, breach of express or implied contract, promissory estoppel, unjust enrichment, breach of a covenant of good faith and fair dealing, violation of public policy, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, misrepresentation, deceit, fraud or negligence.

			
	 	
			*

				
			Any right to recover from any complaints, charges or lawsuits filed by any federal or state agency on the Executive’s behalf.

			
	
			 

				
			*

				
			Any other Claim arising under state or federal law.

			

 

4. Notwithstanding the foregoing, this Agreement does not:

 

	
			 

				
			*

				
			release the Released Parties from any obligation expressly set forth in this Agreement or from any obligation, including without limitation obligations under the Workers Compensation laws, which as a matter of law cannot be released;

			
	
			 

				
			*

				
			prohibit the Executive from filing a charge with the Equal Employment Opportunity Commission (“EEOC”);

			
	
			  

				
			*

				
			prohibit the Executive from participating in an investigation or proceeding by the EEOC or any comparable state or local agency; or

			
	
			  

				
			*

				
			prohibit the Executive from challenging or seeking a determination in good faith of the validity of this release or waiver under the Age Discrimination in Employment Act and does not impose any condition precedent, penalty, or costs for doing so unless specifically authorized by federal law.

			

 

5. The Executive understands that this Agreement is not an admission of liability under any statute or otherwise by the Released Parties, and that the Released Parties do not admit, but deny, any violation of Executive’s legal rights, and that Executive shall not be regarded as a prevailing party for any purpose, including but not limited to, determining responsibility for or entitlement to attorneys’ fees, under any statute or otherwise. The Executive agrees that in the event the Executive brings a Claim in which the Executive seeks damages or other relief from any Released Party, or in the event the Executive seeks to recover against any Released Party in any Claim brought by a governmental agency on the Executive’s behalf, this Agreement shall serve as a complete defense to such Claims.

 

6. The Executive agrees that the Executive has been paid for all hours worked, including any overtime bonus or other incentive compensation, has submitted all invoices and expense reports, and has not suffered any on-the-job injury for which the Executive has not already filed a claim.

 

 

 

 

7. The Executive agrees that every term of this Agreement, including, but not limited to, the fact that an agreement has been reached and the amount paid, shall be treated by the Executive as strictly confidential, and expressly covenants not to display, publish, disseminate, or disclose the terms of this Agreement to any person or entity other than the Executive’s immediate family, the Executive’s attorney(s) (for purposes of seeking advice concerning this agreement only) and the Employee’s accountant(s) (for purposes of seeking tax advice only), unless compelled to make disclosure by lawful court order or subpoena.

 

8. The Executive and the Company have entered into an Invention Assignment and Confidentiality Agreement (the “Assignment Agreement”). The Executive reaffirms his obligation to comply with all of the post-termination obligations in the Assignment Agreement.

 

9. The Executive also agrees that:

 

 

☐ The Executive is entering into this agreement knowingly and voluntarily;

 

☐ The Executive has been advised by the Company to consult an attorney;

 

☐ As set forth in Attachment A, the Executive has been given the right to take 21 days (the “Consideration Period”) to consider this agreement; provided, however the Employee and the Company hereby agree that if there is a dispute as to the payment of wages such that the Executive is unable to make the representation set forth in Section 6 as to payment for hours worked (including any overtime bonus or other incentive compensation), the Consideration Period shall terminate on the later of the natural expiration of the Consideration Period or the date that is one day after the resolution of all claims regarding wages;

 

☐ But for the Executive’s execution of this Agreement, the Executive would not otherwise be entitled to the payments described in paragraph 2; and

 

☐ if any part of this Agreement is found to be illegal or invalid, the rest of the Agreement will be enforceable.

 

10. As a further consideration and inducement for this Agreement, the Executive hereby waives any and all rights under Section 1542 of the California Civil Code or any similar state, local, or federal law, statute, rule, order or regulation the Executive may have with respect to the Company. Section 1542 provides:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

 

 

 

 

The Executive expressly agrees that this Release shall extend and apply to all unknown, unsuspected and unanticipated injuries and damages as well as to those that are now disclosed.

 

11. After the Executive signs this agreement, the Executive will have 7 days to revoke it. If the Executive wants to revoke it, the Executive should deliver a written revocation to __________. If the Executive does not revoke it, the Executive will receive the payment described in Paragraph 2.

 

COMPANY

 

TSS, INC.

 

 

	By:	 	 	Date:	 	 
	 	Name:	 	 	 	 
	 	Title:	 	 	 	 
	 	 	 	 	 	 
	EXECUTIVE	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	Date:	 	 
	Executive	 	 	 	 

 

 

 

 

ATTACHMENT A

 

CONSIDERATION PERIOD

 

I, Kieran Brennan, understand that I have the right to take at least 21 days to consider whether to sign this Separation From Employment and Release Agreement, which I received on [TERMINATION DATE]. If I elect to sign this Agreement before 21 days have passed, I understand I am to sign and date below this paragraph to confirm that I knowingly and voluntarily agree to waive the 21-day consideration period.

 

	
			 

				
			 

			
	
			 

				
			Executive Signature

			
	
			 

				
			 

			
	
			 

				
			 

			
	
			 

				
			Date

			

 

 

 

 

EXHIBIT B

 

INVENTION ASSIGNMENT

AND CONFIDENTIALITY AGREEMENT

 

The following confirms an Invention Assignment and Confidentiality Agreement (“Agreement”) between me and TSS, Inc., a Delaware corporation (the “Company,” which term includes the Company’s affiliates, subsidiaries and any assigns). The promises and commitments that I make in this Agreement are a material part of the Company’s consideration in my employment relationship with the Company.

 

	
			1.

				
			I understand and agree that my employment by the Company creates a duty of loyalty and a relationship of confidence and trust between me and the Company with respect to any information made known to me by the Company or by any client, customer or vendor of the Company or other person who submits information to the Company, or which may be learned by me during the period of my employment.

			

 

	
			2.

				
			I recognize that the Company is continuously engaged in activities that the Company regards as confidential, proprietary and/or legally protectable, which activities are at least in part intended to further the interests of the Company and to provide the Company with a competitive advantage. The Company possesses and will, in the future, continue to possess information that has been or will be created, discovered, developed or otherwise becomes known to the Company (including information created by, discovered or developed by, or made known to me) during the period of or arising out of my employment by the Company. I understand that various intellectual and other property rights have been assigned or otherwise conveyed to the Company. All information concerning the above described activities and information is collectively called “Proprietary Information” (as defined below) under this Agreement.

			

 

	
			3.

				
			By way of illustration, but not limitation, “Proprietary Information” includes: trade secrets, processes, formulas, data and know-how; software programs, improvements, and inventions; research and development plans, tools and techniques; new product introduction plans, specifications, requirements documents and strategies; manufacturing techniques, strategies and costs, expenses, supplier information and lists and distribution information; terms and conditions in contracts of all kinds; marketing plans, strategies and service; support strategies and procedures; development schedules; revenue forecasts; computer programs; copyrightable material, employee salaries, employee expertise, employee ability levels, training programs and procedures, copies of memos or presentations incorporating confidential information that I may have in my files (including those which I authored), patent applications and disclosures and customer lists.

			

 

18

 

 

	
			4.

				
			In consideration of my employment by the Company and the compensation received by me from the Company from time to time, I hereby agree as follows:

			

 

	 	
			(a)

				
			All Proprietary Information shall be the sole property of the Company, and the Company shall be the sole owner of all patents, copyrights, trademarks and other rights related to Proprietary Information. I hereby assign to the Company any rights I may have or acquire in Proprietary Information. At all times, both during and after my employment by the Company, I will keep in confidence and trust all Proprietary Information, and I will not use or disclose any Proprietary Information or anything related to it without written consent of the Company, except as may be necessary in the ordinary course of performing my duties to the Company.

			

 

	 	
			(b)

				
			All documents, records, apparatus, equipment and other physical property, whether or not pertaining to Proprietary Information, furnished to me by the Company or produced by myself or others in connection with employment by the Company shall be and remain the sole property of the Company, shall be used by me solely for the benefit of the Company and shall be returned to the Company immediately as and when requested by the Company. Even if the Company does not so request, I shall return and deliver all such property to the Company upon termination of my employment by me or by the Company for any reason. I will not take with me any such property or any form of copy or reproduction of such property upon my termination.

			

 

	 	
			(c)

				
			I will promptly disclose to the Company, or any persons designated by it, all improvements, inventions, formulas, ideas, processes, techniques, know-how and data, whether or not patentable, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment (all said improvements, inventions, formulas, ideas, processes, techniques, know-how and data shall be hereinafter collectively call “Inventions”).

			

 

	 	
			(d)

				
			I agree that all Inventions that I develop or have developed (in whole or in part, either alone or jointly with others) and (i) use or have used equipment, supplies, facilities or trade secret information of the Company, or (ii) use or have used the hours for which I am to be or was compensated by the Company, or (iii) which relate to the business of the Company or to its actual or demonstrably anticipated research and development or (iv) which result, in whole or in part, from work performed by me for the Company shall be the sole property of the Company and its assigns, and the Company and its assigns shall be the sole owner of all patents, copyrights and other rights in connection therewith. I hereby assign to the Company any rights I may have or acquire in such Inventions. I further agree as to all such inventions and improvements to assist the Company in every proper way (but at the Company’s expense) to obtain and from time to time enforce patents, copyrights or other rights on said inventions and improvements in any and all countries, and to that end I will execute all documents in use for applying for and obtaining such patents and copyrights thereon and enforcing same, as the Company may desire, together with any assignments thereof to the Company or persons designated by it. My obligation to assist the Company in obtaining and enforcing patents, copyrights or other rights for such inventions and improvements in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after such termination for time actually spent by me at the Company’s request on such assistance.

			

 

B-1

 

 

	 	
			(e)

				
			In the event that the Company is unable for any reason whatsoever to secure my signature to any lawful and necessary document required to apply for or execute any patent, copyright or other applications with respect to such inventions and improvements (including renewals, extensions, continuations, divisions or continuations in part thereof), I hereby irrevocably designate and appoint the Company and its authorized officers and agents, as my agents and attorneys-in-fact, this power of attorney being coupled with an interest, to act for and in my behalf and instead of me, to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights or other rights thereon with the same legal force and effect as if executed by me.

			

 

	 	
			(f)

				
			As a matter of record, on Attachment A, I have attached a complete list of all inventions or improvements relevant to the subject matter of my employment by the Company that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my employment with the Company that I desire to remove from the operation of this Agreement, and I covenant that such list is complete. If no such list is signed by me and attached to this Agreement, I represent and warrant that I have no such inventions or improvements at the time of signing this Agreement, and I agree that I will make no claim against the Company with respect to any such inventions or ideas.

			

 

	 	
			(g)

				
			I represent that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement.

			

 

	 	
			(h)

				
			I acknowledge that the Company from time to time may be involved in government projects of a classified nature. I further acknowledge that the Company from time to time may have agreements with other persons or governmental agencies that impose obligations or restrictions on the Company regarding inventions made during the course of work thereunder or regarding the confidential nature of such work or information disclosed in connection therewith. I agree to be bound by all such obligations and restrictions and to take all action necessary to discharge the obligations of the Company thereunder.

			

 

	 	
			(i)

				
			I represent and warrant that execution of this Agreement, my employment with the Company and my performance of my proposed duties to the Company in the development of its business have not and will not violate any obligations which I may have to any former employer.

			

 

B-2

 

 

	 	
			(j)

				
			I agree that at no time during my employment by the Company or thereafter shall I make, or cause or assist any other person to make, any statement or other communication to any third party that impugns or attacks, or is otherwise critical of, the reputation, business or character of the Company or any of its Affiliates or any of their respective directors, officers or employees.

			

 

	
			5.

				
			This Agreement shall be effective as of the first day of my employment by the Company.

			

 

	
			6.

				
			This Agreement may not be changed, modified, released, discharged, abandoned or otherwise amended, in whole or in part, except by an instrument in writing, signed by myself and the Company. I agree that any subsequent change or changes in my duties, salary or compensation shall not affect the validity or scope of this Agreement.

			

 

	
			7.

				
			I acknowledge receipt of this Agreement and agree that with respect to the subject matter hereof it is my final, complete and exclusive agreement with the Company, superseding any previous oral or written representations, understanding or agreements with the Company or any officer or representative with respect to the subject matter herein.

			

 

	
			8.

				
			In the event that any paragraph or provision of this Agreement shall be held to be illegal or unenforceable, such paragraph or provision shall be modified to the extent necessary to give effect to the intent of the parties or, if necessary, severed from this Agreement and the entire Agreement shall not fail on account thereof, but shall otherwise remain in full force and effect.

			

 

	
			9.

				
			This Agreement shall be construed in accordance with the laws of the State of Texas without regard to its choice of law principles.

			

 

	
			10.

				
			This Agreement shall be binding upon me, my heirs, executors, assigns, and administrators and shall inure to the benefit of the Company, its successors and assigns.

			

 

B-3

 

 

I acknowledge that the foregoing restrictions contained in Section 4 are reasonable in all respects including the scope, duration and geographic limitations. I agree that the restrictions are an appropriate means of protecting the Company’s legitimate business interests, and no greater than necessary to protect the Company’s interests. I acknowledge that these restrictions will not unreasonably interfere with my ability to make a living.

 

 

Dated: January 17, 2018

 

 

	
			 

				 
	Kieran Brennan	 
	 	 	 
	Accepted and Agreed to:	 
	 	 	 
	TSS, INC.	 
	 	 	 
	 	 	 
	By:	 	 
	 	Anthony Angelini, Chief Executive Officer	 

 

B-4

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