Document:

Prepared by MERRILL CORPORATION

EXHIBIT

10.22

 

RELEASE AND SEVERANCE

COMPENSATION AGREEMENT

 

THIS RELEASE AND

SEVERANCE COMPENSATION AGREEMENT (the “Agreement”) is between ProAssurance

Corporation, a Delaware corporation (“ProAssurance”), MEEMIC Insurance Company,

a Michigan insurance company (“MEEMIC Insurance”), MEEMIC Holdings, Inc., a

Michigan corporation (“MEEMIC Holdings”) and William P. Sabados, an individual

(the “Executive”).  ProAssurance, MEEMIC

Insurance, and MEEMIC Holdings and their respective majority-owned subsidiaries

are hereinafter collectively referred to as the “Companies.”

 

RECITALS:

 

The Executive is

currently rendering valuable services to MEEMIC Insurance, which is a

wholly-owned subsidiary of MEEMIC Holdings. 

ProAssurance has acquired, or will acquire, control of MEEMIC Holdings

and MEEMIC Insurance in a transaction (the “Consolidation”) that will result in

a “change of control” (the “Change of Control”) under the terms and conditions

of the Change of Control Agreement among MEEMIC Insurance, MEEMIC Holdings and

the Executive effective as of July 1, 2000 (the “Change of Control

Agreement”).  The Companies have offered

to employ the Executive in an at will employment relationship after the

Consolidation and to expand protection to the Executive in the form of severance

benefits payable on termination of employment under certain circumstances after

the Consolidation on the condition that the Executive releases the Companies

from any past or future liability under the Change of Control Agreement.  The Executive desires to continue employment

with the Companies under such terms and conditions, and with the protection

afforded to the Executive by this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, These Premises Considered, and in consideration of

the mutual covenants and promises in this Agreement, the sufficiency of which

is hereby acknowledged, the parties agree as follows:

 

1.                Term

of Agreement.  This Agreement is

subject to, and conditioned upon, the closing (the “Closing”) of the

transactions (the “Consolidation”) contemplated by the Agreement to Consolidate

by and between Medical Assurance, Inc. and Professionals Group, Inc. dated June

22, 2000, as amended November 1, 2000. 

This Agreement is effective on the date of Closing which is scheduled to

occur on June 27, 2001, and shall continue in effect for a period of two years

from the date of Closing (the “Initial Term”). 

Thereafter, this Agreement shall automatically be extended for

successive terms of one year (a “Renewal Term”), except this Agreement may be

terminated after the first Renewal Term upon delivery of written notice of the

termination of this Agreement by any of the Companies at least six months prior

to the expiration of any Renewal Term. 

If the Executive’s employment is terminated during the term of the Agreement,

the date on which the Executive’s employment terminates shall be referred to as

the “Date of Termination.”

 

2.                Severance

Benefits.  If during the term of

this Agreement the Executive leaves the employment of the Company for Good

Reason, as explained in Section 4 of this Agreement, and the Executive signs

the release (the “Release”) that is attached to and incorporated in this

Agreement, the Executive shall receive the following benefits (the “Severance

Benefits”):

 

(a)             An

amount equal to either of whichever the following is applicable: (i) if the

Date of Termination occurs during the Initial Term, two (2) times the

Executive’s annual base salary; or (ii) if the Date of Termination occurs

during a Renewal Term, one (1) times the Executive’s annual base salary.  The “annual base salary” of the Executive

shall be defined as the Executive’s base rate of compensation in effect as of

the Date of Termination, but in no event less than the Executive’s base rate of

compensation in effect as of the end of the last calendar quarter preceding the

Date of Termination;

 

(b)            An

amount equal to either of whichever of the following is applicable: (i) if the

Date of Termination occurs during the Initial Term, two (2) times the average

total annual incentive award(s) or bonus(es); or (ii) if the Date of

Termination occurs during a Renewal Term, one (1) times the average total

annual incentive award(s) or bonus(es). 

The “average total annual incentive award(s) or bonus(es)” shall mean

the average of the sum of (i) cash awards or bonuses earned with the Companies

by the Executive, plus (ii) the value of stock awarded to the Executive by the

Companies for each complete fiscal year during the last three years (whether or

not deferred) or, if shorter, over the Executive’s entire period of employment

with the Companies.  The value of stock

awarded to the Executive shall be calculated based on the value of the stock as

of the date the stock was awarded to the Executive as annual incentive compensation.  Notwithstanding the foregoing, the

Executive’s actual total annual incentive awards or bonuses shall be calculated

excluding the value of options to purchase stock which may have been awarded to

the Executive;

 

(c)             Payment

of the Executive’s monthly COBRA premiums for continued health and dental

insurance coverage for the shorter of the following:  (i) 18 months if the Date of Termination occurs in the Initial

Term; (ii) 12 months if the Date of Termination occurs in the Renewal Term;

(iii) until the Executive no longer has coverage under COBRA; or (iv) until the

Executive becomes eligible for substantially similar coverage under a

subsequent employer’s group health plan; and

 

(d)                Outplacement

services that are customary to Executive’s position.

 

The cash severance benefits described in subparagraphs

(a) and (b) above shall be paid in equal monthly installments during the period

that the covenants set forth in Section 7 shall be in effect commencing upon

the Date of Termination; provided that the obligation of the Companies to pay such

cash severance benefits to the Executive shall be subject to termination under

the provisions of Section 7 hereof in the event the Executive should violate

the covenants set forth therein; and provided further that the payment of such

cash severance benefits shall be accelerated and payable in lump sum by the

Companies upon a breach of this Agreement as a result of the failure of a

successor (herein defined) to assume this Agreement as required in Section 10

of this Agreement.  The Companies shall

withhold from any amounts payable under this Agreement all federal, state, city

or other income and employment axes that shall be required.

 

The Companies shall fund the obligation to pay cash

Severance Benefits by depositing in escrow an amount equal to the sum of the

amounts payable to the Executive under subparagraphs (a) and (b) hereof (the

“Escrow Funds”) with SouthTrust Bank (or another financial institution with

total assets of more than $1,000,000,000) as escrow agent (the “Escrow Agent”).  The Escrow Funds shall be held, invested and

distributed by Escrow Agent in accordance with the following provisions.  At the time of delivery of the Escrow Funds,

the Escrow Agent shall acknowledge receipt of the Escrow Funds and agree to be

bound by the provisions of this Agreement in a separate written document.  The Escrow Agent shall invest the Escrow

Funds in a money market account.  Unless

and until the Escrow Agent receives notice from ProAssurance that the Executive

has breached this Agreement, the Escrow Agent shall distribute the Escrow Funds

to the Executive in the same number of equal monthly installments as the number

of whole calendar months in the Restricted Period (as defined in Section 7

hereof).  The monthly installments shall

be distributed to the Executive on the first day of each calendar month in the

Restricted Period together with accrued and undistributed earnings on the

Escrow Funds.  If the Company delivers

written notice to the Escrow Agent and Executive that the cash Severance

Benefits payable to Executive are subject to termination under Section 7 of

this Agreement, the Escrow Agent shall distribute the balance of the Escrow

Funds and accrued and undistributed earnings thereon to ProAssurance unless the

Escrow Agent receives a written notice of objection from the Executive within

15 days after delivery of ProAssurance’s notice.  If Executive provides a timely notice of objection, the Escrow

Agent shall hold the Escrow Funds until it receives a written notice of

distribution from the arbitrator appointed pursuant to Section 13 hereof or a

joint written notice of distribution from the Executive and ProAssurance.  The failure of the Executive or the Company

to deliver notice to the Escrow Agent as herein provided shall not be a waiver

of any of their respective rights under this Agreement.

 

The Executive shall be entitled to the following in

addition to and not in limitation of the Severance Benefits:  (i) accrued and unpaid base salary as of the

Date of Termination; (ii) accrued vacation and sick leave, if any, on Date of

Termination in accordance with the then current policy of the Companies with

respect to terminated employees generally; and (iii) vested benefits under the

Companies’ employee benefit plans in which the Executive was a participant on

Date of Termination, which vested benefits shall be paid or provided for in

accordance with the terms of said employee benefit plans.  If the Executive has regular use of a

vehicle provided by the Companies for business and personal use on Date of

Termination, the Companies shall offer for sale to the Executive the vehicle at

a purchase price equal to either of the following: (x) if owned by any of the

Companies, the then current book value of the vehicle (cost less accumulated

depreciation), or (y) if leased by any of the Companies, the purchase price

upon the exercise of the purchase option, if any, under the lease.

 

The Executive shall not be entitled to receive

Severance Benefits if employment with the Companies is terminated by reason of

death of Executive, retirement of Executive pursuant to the Company’s

retirement plan as then in effect, the Executive having reached the age of

mandatory retirement (if such requirement then exists for bona fide executives)

or Disability of Executive (herein defined); or by reason of termination of

employment by the Executive without Good Reason (herein defined); or by reason

of termination of employment by the Companies with Cause (herein defined).

 

The Executive shall be under no duty or obligation to

seek or accept other employment and shall not be required to mitigate the

amount of the Severance Benefits provided under the Agreement by seeking

employment or otherwise; provided, however, that the Executive shall be

required to notify the Companies if the Executive becomes covered by a health

or dental care program providing substantially similar coverage, at which time

health or dental care continuation coverage provided under this Agreement shall

cease.

 

3.                Parachute

Payments.  Subject to Section 280G

of the Internal Revenue Code of 1986, as amended (“Code”), if the board of

directors of ProAssurance determines that an excise tax under Section 4999

(“Excise Tax”) would be due, the Executive’s Severance Benefits under this

Agreement shall be limited to the amount necessary to avoid the Excise Tax only

if applying such a limit results in a greater net benefit to the Executive than

would have resulted had the benefits not been limited and an Excise Tax

paid.  For purposes of making such

computation:

 

(a)             Any

other payments or benefits received or to be received by the Executive in

connection with the Change of Control or the Executive’s termination of

employment (whether pursuant to the terms of this Agreement or any other plan,

arrangement, or agreement with the Companies, or with any person whose actions

result in the Change of Control) shall be treated as “parachute payments”

within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute

payments” within the meaning of Section 280G(b)(1) of the Code shall be treated

as subject to the Excise Tax, unless, in the opinion of tax counsel selected by

ProAssurance’s independent auditors, such other payments or benefits (in whole

or in part) do not constitute parachute payments, or such other payments or

benefits (in whole or in part) represent reasonable compensation for services

actually rendered within the meaning of Section 280G(b)(4) of the Code in

excess of the base amount within the meaning of Section 280G(b)(3) of the Code,

or such other payments or benefits (in whole or in part) are otherwise not

subject to the Excise Tax.  In the event

an Excise Tax is due, because of payments made under this Agreement, the

Executive shall be responsible for paying said Excise Tax.

 

(b)            The

amount of the Severance Benefits that will be treated as subject to the Excise

Tax shall be equal to the lesser of: (i) the total amount of the Severance

Benefits; or (ii) the amount of excess parachute payments within the meaning of

Section 280G(b)(1) (after applying subparagraph (a) above).

 

(c)             The

value of any noncash benefits or any deferred payment or benefit shall be

determined by ProAssurance’s independent auditors in accordance with the

principles of Sections 280G(d)(3) and (4) of the Code.

 

(d)            The

Executive shall be deemed to pay federal income taxes at the highest marginal

rate of federal income taxation in a calendar year in which the Severance

Benefits are to be paid, and state and local income taxes at the highest

marginal rate of taxation in the state and locality of the Executive’s

residence on the Date of Termination, net of the maximum reduction in federal

income taxes that could be obtained from deduction of such state and local

taxes.

 

In the event the Internal

Revenue Service adjusts the computation in subparagraphs (a) through (d) above,

so that the Executive did not receive the greatest net benefit, the Companies

shall reimburse the Executive for the amount necessary to make the payment of

Severance Benefits to the Executive to the extent permitted hereunder, plus a

market rate of interest as determined by the Board of Directors of

ProAssurance.

 

4.                Good

Reason for Termination.  In the

event that the Executive’s employment relationship with the Companies is

terminated for any of the reasons described in this Section 4, the Executive

shall be entitled to Severance Benefits, subject to and described in Section 2

of this Agreement.  “Good Reason” shall

constitute any of the following circumstances if they occur without the Executive’s

express written consent during the term of this Agreement:

 

(a)             The

Executive no longer holds an executive level position with executive level

responsibilities with the Companies consistent with the Executive’s training

and experience;

 

(b)            The

Companies require that the Executive’s primary location of employment be more

than 50 miles from the location of the Executive’s primary location of

employment on June 27, 2001;

 

(c)             The

failure of the Companies to provide the Executive, at a level commensurate with

the Executive’s position, the incentive compensation opportunities and employee

benefits that are provided to other executives of comparable rank with the

Companies;

 

(d)                                A breach by the

Companies of any provision of this Agreement. including without limitation, the

failure of a successor to assume this Agreement as required in Section 10

hereof;

 

(e)                                The termination

of the Executive’s employment by the Companies for a reason other than: (i)

death; (ii) retirement pursuant to the Companies’ retirement plan as then in

effect; (iii) Disability as explained in Section 5 of this Agreement; (iv) the

Executive has reached the age of mandatory retirement (if such requirement then

exists for bona fide executives); (v) for Cause, as explained in Section 6 of

this Agreement;

 

(f)             A

reduction by the Companies in the Executive’s base salary in effect as of the

date of this Agreement; or

 

(g)            The

termination or non-renewal of this Agreement by the Companies.

 

The Executive must provide the Companies with written

notice no later than 45 calendar days after the Executive knows or should have

known that Good Reason has occurred. 

Following the Executive’s Notice, the Companies shall have 45 calendar

days to rectify the circumstances causing the Good Reason.  If the Company fails to rectify the event(s)

causing the Good Reason within the 45 day period after the Executive’s Notice,

or if any of the Companies delivers to the Executive written notice stating

that the circumstances cannot or shall not be rectified, the Executive shall be

entitled to assert Good Reason and terminate employment on or before 90 days

after the delivery of the Executive’s Notice. 

Should Executive fail to provide the required Notice in a timely manner,

Good Reason shall not be deemed to have occurred as a result of that

event.  The Initial Term or a Renewal

Term shall not be deemed to have expired during the Notice period, however, as

long as the Executive has provided Notice within the Term.

 

5.                Disability.  For purposes of this Agreement, Disability

means a serious injury or illness that requires the Executive to be under the

regular care of a licensed medical physician and renders the Executive

incapable of performing the essential functions of the Executive’s position for

12 months as determined by the Board of Directors of the Companies in good

faith and upon receipt of and in reliance on competent medical advice from one

or more individuals selected by the Board of Directors, who are qualified to

give professional medical advice.

 

6.                Cause.  If the Executive’s employment is terminated

for Cause, as described below in this Section, the Executive shall not be

eligible for severance benefits and all rights of the Executive and obligations

of the Companies under this Agreement shall expire.  Cause means:

 

(a)             The

Executive has been convicted in a federal or state court of a crime classified

as a felony;

 

(b)            Action

or inaction by the Executive (i) that constitutes embezzlement, theft,

misappropriation or conversion of assets of the Companies which alone or

together with related actions or inactions involve assets of more than a de

minimis amount, or that constitutes fraud, gross malfeasance of duty, or

conduct grossly inappropriate to Executive’s office; and (ii) such action or

inaction has adversely affected or is likely to adversely affect the business

of the Companies or has resulted or is intended to result in direct or indirect

gain or personal enrichment of the Executive to the detriment of the Companies;

 

(c)             The

Executive has been grossly inattentive to, or in a grossly negligent manner

failed to competently perform, Executive’s job duties and the failure was not

cured within 45 days after written notice from the Companies.

 

Any termination of the Executive’s employment by the

Companies for Cause shall be communicated by a notice of termination (the

“Notice of Termination”) to the Executive. 

The Notice of Termination shall be a written notice indicating the

specific termination provision of this Agreement relied upon and shall set

forth in reasonable detail the facts and circumstances claimed to provide a

basis for termination of the Executive’s employment under this provision.

 

7.                Non-Competition.

 

(a)             In

the event the Date of Termination occurs during the Initial Term, the Executive

(i) will be bound by and subject to any covenant not to compete or

noncompetition agreement with the Companies (or any of them) to which the

Executive was subject as of the Date of Termination (other than the

noncompetition agreement set forth in Section 7(b) hereof), or (ii) in the

alternative if the Executive is not subject to a covenant not to compete or

noncompetition agreement with the Companies (or any of them) as of the Date of

Termination (other than a covenant not to compete or noncompetition agreement

contained in an employee handbook or otherwise applicable to employees

generally), the Executive will be bound by and subject to the noncompetition

agreement set forth in subparagraph 7(b) of this Agreement.  Upon the expiration of the Initial Term, any

and all covenants not to compete or noncompetition agreements between the

Executive and the Companies (or any of them) then in effect shall be superseded

by the noncompetition agreement set forth in Section 7(b) hereof and the

Executive and the Companies shall not be bound by the provisions of any covenant

not to compete or noncompetition agreement other than the provisions of Section

7(b) hereof unless specifically agreed to in a written document executed by the

Executive and the Companies (or any of them) after the Closing.

 

(b)            In

the event that either (i) the Date of Termination occurs during the Initial

Term and the provisions of Section 7(a)(ii) hereof are binding on the

Executive, or (ii) the Date of Termination occurs during a Renewal Term, the

Executive will not during the Restricted Period (herein defined):

 

(i)                become employed by a competitor

company that is underwriting, selling or marketing insurance products that

target educators in MEEMIC’s primary market area; or

 

(ii)                assist a competitor company to

develop insurance products that target educators and that will be marketed or

sold in MEEMIC’s primary area; or

 

(iii)                solicit or induce any other

employees of the Companies to leave such employment or accept employment with

any other person or entity, or solicit or induce any insurance agent of the

Companies to offer, sell or market insurance products that target educators in

MEEMIC’s primary market area, other than on behalf of MEEMIC.

 

“Competitor company” means an insurance company, insurance agency,

business, for profit or not for profit organization (other than the Companies)

which is engaged directly or indirectly in underwriting, selling or marketing

any insurance product that targets educators.

 

“Educators” means teachers, administrators and other employees of

public and private school systems (including colleges and universities).

 

 “Primary market area” means the state of

Michigan and any other state in which MEEMIC Insurance derived more than $5

million in direct written premiums from the sale of personal auto and

homeowners insurance in the most recent complete fiscal year prior to the Date

of Termination.

 

“Restricted Period” means

as applicable either (i) if the Date of Termination occurs within the Initial

Term, a period of 24 months from such Date of Termination; or (ii) if the Date

of Termination occurs within a Renewal Term, a period of 12 months from such

Date of Termination.

 

“Employed” includes activities as an owner, proprietor, employee,

agent, solicitor, partner, member, manager, principal, shareholder (owning more

than 1% of the outstanding stock), consultant, officer, director or independent

contractor.

 

“Companies” means any company that is a subsidiary of ProAssurance, now

or in the future, and any other company that has succeeded to the business of

any of the Companies.

 

If the Executive is

deemed to have materially breached the non-competition covenants set forth in

Section 7 of this Agreement, the Companies may, in addition to seeking an

injunction or any other remedy they may have, withhold or cancel any remaining

payments or benefits due to the Executive pursuant to Section 2 of this

Agreement.  The Companies shall give

prior or contemporaneous written notice of such withholding or cancellation of

payments in accordance with Section 2 hereof. 

If the Executive violates any of these restrictions, the Companies shall

be further entitled to an immediate preliminary and permanent injunctive

relief, without bond, in addition to any other remedy which may be available to

the Companies.

 

Both parties agree that

the restrictions in this Agreement are fair and reasonable in all respects,

including the geographic and temporal restrictions, and that the benefits

described in this Agreement, to the extent any separate or special

consideration is necessary, are fully sufficient consideration for the

Executive’s obligations under this Agreement.

 

8.                Confidentiality.  Executive will remain obligated under any

confidentiality or nondisclosure agreement with the Companies (or any of them)

that is currently in effect or to which the Executive may in the future be

bound.  In the event that the Executive

is at any time not the subject of a separate confidentiality or nondisclosure

agreement with the Companies (or any of them), Executive expressly agrees that

Executive shall not use for the Executive’s personal benefit, or disclose,

communicate or divulge to, or use for the direct or indirect benefit of any

person, firm, association or company any confidential or competitive material

or information of the Companies or their subsidiaries, including without

limitation, any information regarding insureds or other customers, actual or

prospective, and the contents of their files; marketing, underwriting or

financial plans or analyses which is not a matter of public record; claims

practices or analyses which are not matters of public record; pending or past

litigation in which the Companies have been involved and which is not a matter

of public record; and all other strategic plans, analyses of operations,

computer programs, personnel information and other proprietary information with

respect to the Companies which are not matters of public record.  Executive shall return to the Companies

promptly, and in no event later than the Date of Termination, all items,

documents, lists and other materials belonging to the Companies or their

subsidiaries, including but not limited to, credit, debit or service cards, all

documents, computer tapes, or other business records or information, keys and

all other items in the Executive’s possession or control.

 

9.                Release

of Change of Control Agreement.  In

consideration of the continued employment of the Executive by the Companies

after the Change of Control and the obligation of the Companies to pay the

Executive Severance Benefits as herein provided, the Executive hereby waives,

releases and forever discharges the Companies and each of their direct or

indirect parents, subsidiaries, affiliates and related entities, and all

present or former employees, officers, agents, directors or representatives of

any of them, from any and all claims, charges, suits, causes of action,

demands, expenses and compensation whatsoever, known or unknown, direct or

indirect, on account of or growing out of the Executive’s Change of Control

Agreement, including, without limitation, the payment of severance benefits as

provided thereunder.  Executive hereby

further agrees that he will not institute any suit or action at law, in equity

or otherwise against the Companies or any of their direct or indirect parents,

subsidiaries, affiliates and related entities, or the present or former

employees, officers, agents, directors, or representatives of any of them and

their respective successors and assigns, nor will the Executive ever institute,

prosecute, or in any way aid in the institutional prosecution of any claim,

demand, action or cause of action for damages, costs, expenses, penalties,

fines, compensation or equitable relief, for or on account of any damage, loss

or injury to either person or property or both, whether developed or undeveloped,

resulting or to result, known or unknown, which Executive ever had, now has, or

which Executive or his successors and assigns may in the future have against

any of said persons in connection with the Change of Control Agreement of the

Executive.

 

The Executive

acknowledges and agrees that Executive has been advised in writing by this

Agreement, and otherwise, to CONSULT WITH AN ATTORNEY before Executive enters

into this Agreement.  The Executive

agrees that the Executive received and read a copy of this Agreement prior to

executing the same.

 

10.                Successors

of ProAssurance.  ProAssurance will

require any successor (herein defined) to assume expressly and agree to perform

this Agreement in the same manner and to the same extent that the Companies

would be required to perform this Agreement if no such succession had taken

place.  Failure of ProAssurance to

obtain such agreement prior to the effectiveness of any such succession shall

be a breach of this Agreement and shall entitle the Executive to terminate employment

for Good Reason and receive Severance Benefits as provided in Section 2

hereof.  Reference to the Companies in

this Agreement shall include any successor which assumes and agrees to perform

this Agreement by operation of law or otherwise.

 

The term “successor” means any Person, as defined by

Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the

“Exchange Act”) other than a Person in control of the Companies immediately

after completion of the Change of Control transaction, that either (i) becomes

the Beneficial Owner, as defined by Rule 13d-3 of the General Rules and

Regulations under the Exchange Act, directly or indirectly, of the securities

of ProAssurance representing more than 50.1% of the combined voting power of

the then outstanding securities of ProAssurance; (ii) purchases or otherwise

acquires substantially all of the assets of the Companies such that the

Companies cease to function on a going forward basis as an insurance holding

company system that provides medical professional liability insurance; or (iii)

survives a merger, consolidation or reorganization that results in less than

50.1% of the combined voting power of ProAssurance or such surviving entity

being owned by stockholders of ProAssurance immediately preceding such merger,

consolidation or reorganization.

 

11.                Notice.  For 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 by hand or commercial

courier or mailed by certified or registered mail, return receipt requested,

postage prepaid, addressed to the respective addresses as set forth below or to

such other address as one party may have furnished to the other in writing in

accordance herewith.

 

 

	

  Notice to the Executive:

  	

   

  
	

   

  
	

  William P. Sabados

  
	

  MEEMIC Insurance

  Company

  
	

  691 Squirrel Road

  
	

  Suite 200

  
	

  Auburn Hills, MI  48326

  
	

   

  
	

  Notice to the Companies:

  	

   

  
	

   

  
	

  ProAssurance

  Corporation

  
	

  Mailing Address:

  
	

  P. O. Box 590009

  
	

  Birmingham, Alabama 35259-0009

  
	

  Street Address:

  
	

  100 Brookwood Place

  
	

  Birmingham, Alabama

  35209

  
	

  Attention: Chairman of

  the Board

  
			

 

12.                Claims

Procedure.

 

(a)             The

administrator for purposes of this Agreement shall be ProAssurance

(“Administrator”), whose address is 100 Brookwood Place, Birmingham, Alabama

35209; Telephone: (205) 877-4400.  The

“Named Fiduciary” as defined in Section 402(a)(2) or ERISA, also shall be

ProAssurance.  ProAssurance shall have

the right to designate one or more employees of the Companies as the Administrator

and the Named Fiduciary at any time, and to change the address and telephone

number of the same.  ProAssurance shall

give the Executive written notice of any change in the Administrator and Named

Fiduciary, or in the address or telephone number of the same.

 

(b)            The

Administrator shall make all determinations as to the right of any person to

receive benefits under the Agreement. 

Any denial by the Administrator of a claim for benefits by the Executive

(“the claimant”) shall be stated in writing by the Administrator and delivered

or mailed to the claimant within ten (10) days after receipt of the claim,

unless special circumstances require an extension of time for processing the

claim.  If such an extension is

required, written notice of the extension shall be furnished to the claimant

prior to the termination of the initial 10-day period.  In no event shall such extension exceed a

period of ten (10) days from the end of the initial period.  Any notice of denial shall set forth the

specific reasons for the denial, specific reference to pertinent provisions of

this Agreement upon which the denial is based, a description of any additional

material or information necessary for the claimant to perfect the claim, with

an explanation of why such material or information is necessary, and any

explanation of claim review procedures, written to the best of the

Administrator’s ability in a manner that may be understood without legal or

actuarial counsel.

 

(c)             A

claimant whose claim for benefits has been wholly or partially denied by the

Administrator may request, within ten (10) days following the receipt of such

denial, in a writing addressed to the Administrator, a review of such

denial.  The claimant shall be entitled

to submit such issues or comments in writing or otherwise, as the claimant

shall consider relevant to a determination of the claim, and the claimant may

include a request for a hearing in person before the Administrator.  Prior to submitting the request, the claimant

shall be entitled to review such documents as the Administrator shall agree are

pertinent to the claim.  The claimant

may, at all stages of review, be represented by counsel, legal or otherwise, of

the claimant’s choice.  All requests for

review shall be promptly resolved.  The

Administrator’s decision with respect to any such review shall be set forth in

writing and shall be mailed to the claimant not later than ten (10) days

following receipt by the Administrator of the claimant’s request unless special

circumstances, such as the need to hold a hearing, require an extension of time

for processing, in which case the Administrator’s decision shall be so mailed

not later than twenty (20) days after receipt of such request.

 

13.                Arbitration.  The parties to this Agreement agree that

final and binding arbitration shall be the sole recourse to settle any claim or

controversy arising out of or relating to a breach or the interpretation of

this Agreement, except as either party may be seeking injunctive relief.  Either party may file for arbitration.  A claimant seeking relief on a claim for

benefits, however, must first follow the procedure in Section 12 hereof and may

file for arbitration within sixty (60) days following claimant’s receipt of the

Administrator’s written decision on review under Section 12(c) hereof, or if

the Administrator fails to provide any written decision under Section 12

hereof, within 60 days of the date on which such written decision was required

to be delivered to the claimant as therein provided.  The arbitration shall be held at a mutually agreeable location,

and shall be subject to and in accordance with the arbitration rules then in

effect of the American Arbitration Association; provided that if the location

cannot be agreed upon the arbitration shall be held in either Atlanta, Georgia,

or Chicago, Illinois, whichever location is closer to the principal office

where the Executive was employed on Date of Termination.  The arbitrator may award any and all

remedies allowable by the cause of action subject to the arbitration, but the

arbitrator’s sole authority shall be to interpret and apply the provisions of

this Agreement.  In reaching its

decision the arbitrator shall have no authority to change or modify any

provision of this Agreement or other written agreement between the

parties.  The arbitrator shall have the

power to compel the attendance of witnesses at the hearing.  Any court having jurisdiction may enter a

judgment based upon such arbitration. 

All decisions of the arbitrator shall be final and binding on the parties

without appeal to any court.  Upon

execution of this Agreement, the Executive shall be deemed to have waived any

right to commence litigation proceedings regarding this Agreement outside of

arbitration or injunctive relief without the express consent of

ProAssurance.  The Companies shall pay

all arbitration fees and the arbitrator’s compensation.  If the Executive prevails in the arbitration

proceeding, the Companies shall reimburse to the Executive the reasonable fees

and expenses of Executive’s personal counsel for his or her professional

services rendered to the Executive in connection with the enforcement of this

Agreement.

 

14.                Miscellaneous.

 

(a)             Except insofar as this provision

may be contrary to applicable law, no sale, transfer, alienation, assignment,

pledge, collateralization or attachment of any benefits under this Agreement

shall be valid or recognized by the Companies.

 

(b)            This

Agreement is an unfunded deferred compensation arrangement for a member of a

select group of the Companies’ management and any exemptions under ERISA, as

applicable to such arrangement, shall be applicable to this Agreement.  Nothing in this Agreement shall require or

be deemed to require the Companies or any of them to segregate, earmark or

otherwise set aside any funds or other assets to provide for any payments made

or required to be made hereunder.

 

(c)             Nothing

in this Agreement shall be deemed to create an employment agreement between the

Executive and the Companies or any of them providing for Executive’s employment

for any fixed duration, nor shall it be deemed to modify or undercut the

Executive’s at will employment status with the Companies.

 

(d)            Neither

the provisions of this Agreement nor the severance benefits provided hereunder

shall reduce any amounts otherwise payable, or in any way diminish the

Executive’s rights as an employee of the Companies, whether existing now or

hereafter, under any benefit, incentive, retirement, stock option, stock bonus

or stock purchase plan, or any employment agreement or other plan or

arrangement.

 

(e)             This

Agreement sets forth the entire agreement between the parties with respect to

the matters set forth herein.  This

Agreement may not be modified or amended except by written agreement intended

as such and signed by all parties.

 

(f)             This

Agreement shall benefit and be binding upon the parties and their respective

directors, officers, employees, representatives, agents, heirs, successors,

assigns, devisees, and legal or personal representatives.

 

(g)            The

Companies, from time to time, shall provide government agencies with such

reports concerning this Agreement as may be required by law, and shall provide

Executive with such disclosure concerning this Agreement as may be required by

law or as the Companies may deem appropriate.

 

(h)                Executive

and the Companies respectively acknowledge that each of them has read and

understand this Agreement, that they have each had adequate time to consider

this Agreement and discuss it with each of their attorneys and advisors, that

each of them understands the consequences of entering into this Agreement, that

each of them is knowingly and voluntarily entering into this Agreement, and

that they are each competent to enter into this Agreement.

 

(i)              If

any provision of this Agreement is determined to be unenforceable, at the

discretion of ProAssurance the remainder of this Agreement shall not be

affected but each remaining provision shall continue to be valid and effective

and shall be modified so that it is enforceable to the fullest extent permitted

by law.  Moreover, in the event this

Agreement is determined to be unenforceable against any of the Companies, it

shall continue to be valid and enforceable against the other Companies.

 

(j)              This

Agreement will be interpreted as a whole according to its fair terms.  It will not be construed strictly for or

against either party.

 

(k)             Except

to the extent that federal law controls, this Agreement is to be construed

according to Michigan law.

 

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of

this 14th day of June, 2001.

 

	

  EXECUTIVE:

  
	

   

  
	

  /s/ William P. Sabados

  	

   

  
	

  William P. Sabados

  
	

   

  
	

  PROASSURANCE

  CORPORATION

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

  /s/ Victor T. Adamo

  
	

   

  	

   

  	

  Its: President

  
	

   

  	

   

  	

   

  
	

  MEEMIC

  INSURANCE COMPANY

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

  /s/ R. Kevin Clinton

  
	

   

  	

   

  	

  Its: President

  
	

   

  	

   

  	

   

  
	

  MEEMIC

  HOLDINGS, INC.

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

  /s/ R. Kevin Clinton

  
	

   

  	

   

  	

  Its: President

  
				

 

RELEASE IN CONJUNCTION

WITH SEVERANCE COMPENSATION

 

This Release of Claims

(“Release”) is between ProAssurance Corporation (“ProAssurance”), MEEMIC

Insurance Company, MEEMIC Holdings, Inc., and any successor company that has

assumed the Agreement to which this Release was an attachment (all such

organizations being referred to in this Release as the "Companies")

and William P. Sabados ("Executive”).

 

The Companies and

Executive have agreed to terminate their employment relationship. To effect an

orderly termination, the Executive, and the Companies are entering into this

Release.

 

1.     For the purposes of this Release, “Date of

Termination” is the effective date of Executive’s termination of employment

from Companies.  Executive hereby waives

any and all rights Executive may otherwise have to continued employment with or

re-employment by the Companies or any parent, subsidiary or affiliate of

Companies.

 

2.                Effective with the Date of

Termination, Executive is relieved of all duties and obligations to the

Companies, except as provided in this Release or any applicable provisions of

the Release and Severance Compensation Agreement between Companies and

Executive, effective as of June 27, 2001 (the “Severance Agreement”), which

survive termination of the employment relationship.

 

3.                Executive agrees that this

Release and its terms are confidential and shall not be disclosed or published

directly or indirectly to third persons, except as necessary to enforce its

terms, by Executive or to Executive’s immediate family upon their agreement not

to disclose the fact or terms of this Release, or to Executive’s attorney,

financial consultant or accountant, except that Executive may disclose, as

necessary, the fact that Executive has terminated Executive’s employment with

the Companies.

 

4.     Any fringe benefits that Executive has

received or currently is receiving from the Companies or its affiliates shall

cease effective with the Date of Termination, except as otherwise provided for

in this Release, in the Severance Agreement or by law.

 

5.     The parties agree that the terms contained

and payments provided for in the Severance Agreement are compensation for and

in full consideration of Employee's release of claims under this Release, and

Executive’s confidentiality, non-compete, non-solicitation and non-disclosure

agreements contained in the Severance Agreement.

 

6.     The Executive shall be under no duty or

obligation to seek or accept other employment and shall not be required to

mitigate the amount of the Severance Benefits (as defined and provided under

the Severance Agreement) by seeking employment or otherwise, provided, however,

that the Executive shall be required to notify the Companies if the Executive

becomes covered by a health or dental care program providing substantially

similar coverage, at which time health or dental care continuation coverage

provided under the Agreement shall cease.

 

7.                Except for claims arising under

the Severance Agreement, Executive waives, releases, and forever discharges the

Companies and each of their direct or indirect parents, subsidiaries,

affiliates, and any partnerships, joint ventures or other entities involving or

related to any of the Companies, their parents, subsidiaries or affiliates, and

all present or former employees, officers, agents, directors, successors,

assigns and attorneys of any of these corporations, persons or entities (all

collectively referred to in this Release as the "Released") from any

and all claims, charges, suits, causes of action, demands, expenses and

compensation whatsoever, known or unknown, direct or indirect, on account of or

growing out of Executive’s employment with and termination from the Companies,

or relationship or termination of such relationship with any of the Released,

or arising out of related events occurring through the date on which this

Release is executed. This includes, but is not limited to, claims for breach of

any employment contract; handbook or manual; any express or implied contract;

any tort; continued employment; loss of wages or benefits; attorney fees;

employment discrimination arising under any federal, state, or local civil

rights or anti-discrimination statute, including specifically any claims Executive

may have under the federal Age Discrimination in Employment Act, as amended, 29

USC §§ 621, et seq.; emotional distress; harassment; defamation;

slander; and all other types of claims or causes of action whatsoever arising

under any other state or federal statute or common law of the United States.

 

8.     The Executive does not waive or release any

rights or claims that may arise under the federal Age Discrimination in

Employment Act, as amended, after the date on which this Release is executed by

the Executive.

 

9.     The Executive acknowledges and agrees that

Executive has been advised in writing by this Release, and otherwise, to

CONSULT WITH AN ATTORNEY before Executive executes this Release.

 

10.   The Executive agrees that Executive received

a copy of this Release prior to executing the Agreement, that this Release

incorporates the Companies’ FINAL OFFER; that Executive has been given a period

of at least twenty-two (22) calendar days within which to consider this Release

and its terms and to consult with an attorney should Executive so elect.

 

11.   The Executive shall have seven (7) calendar

days following Executive’s execution of this Release to revoke this Release.

Any revocation of this Release shall be made in writing by the Executive and

shall be received on or before the time of close of business on the seventh

calendar day following the date of the Employee's execution of this Release at

ProAssurance’s address at 100 Brookwood Place, P. O. Box 590009, Birmingham,

Alabama 35259-0009, Attention: Chairman, or such other place as the Companies

may notify Executive in writing. This Release shall not become effective or

enforceable until the eighth (8th) calendar day following the

Executive’s execution of this Release.

 

12.                Executive and the Companies

acknowledge that they have read and understand this Release, that they have had

adequate time to consider this Release and discuss it with their attorneys and

advisors, that they understand the consequences of entering into this Release,

that they are knowingly and voluntarily entering into this Release, and that

they are competent to enter into this Release.

 

13.   This Release shall benefit and be binding

upon the parties and their respective directors, officers, employees, agents,

heirs, successors, assigns, devisees and legal or personal representatives.

 

14.   This Release, along with the attached

Severance Agreement, sets forth the entire agreement between the parties at the

time and date these documents are executed, and fully supersedes any and all

prior agreements or understandings between them pertaining to the subject

matter in this Release. This Release may not be modified or amended except by a

written agreement intended as such, and signed by all parties.

 

15.                Except to the extent that

federal law controls, this Release is to be construed according to the law of

the state of Michigan.

 

16.   If any provision of this Release is

determined to be unenforceable, at the discretion of ProAssurance the remainder

of this Release shall not be affected but each remaining provision or portion

shall continue to be valid and effective and shall be modified so that it is

enforceable to the fullest extent permitted by law.

 

17.   To signify their agreement to the terms of

this Release, the parties have executed it on the date set forth opposite their

signatures, or those of their authorized agents, which follow.

 

	

   

  	

   

  	

  EXECUTIVE

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Dated:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  William P. Sabados

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  PROASSURANCE

  CORPORATION

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Dated:

  	

   

  	

   

  	

   

  	

  By:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Its:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  MEEMIC

  HOLDINGS, INC.

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Dated:

  	

   

  	

   

  	

   

  	

  By:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Its:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  MEEMIC INSURANCE COMPANY

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Dated:

  	

   

  	

   

  	

   

  	

  By:

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Its:Prepared by MERRILL CORPORATION

 

THIRD LOAN MODIFICATION AGREEMENT

 

This Third Loan

Modification Agreement (this “Loan Modification Agreement’) is entered into as

of August 30, 2001, by and between SILICON VALLEY BANK, a California-chartered

bank, with its principal place of business at 3003 Tasman Drive, Santa

Clara, California 95054 and with a loan production office located at One Newton

Executive Park, Suite 200, 2221 Washington Street, Newton, Massachusetts 02462,

doing business under the name “Silicon Valley East” (“Bank”) and NMS COMMUNICATIONS

CORPORATION, formerly know as NATURAL MICROSYSTEMS CORPORATION, a

Delaware corporation with its chief executive office located at 100 Crossing

Boulevard, Framingham, Massachusetts(“Borrower”).

 

1.             DESCRIPTION OF EXISTING

INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and obligations

which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant

to a loan arrangement dated as of May 14, 1999, evidenced by, among other

documents,a certain Loan and Security Agreement dated as of May 14, 1999,

between Borrower and Bank, as amended by a certain First Loan Modification

Agreement dated March 8, 2001, as further amended by a certain Second Loan

Modification Agreement dated September 14, 2000  (as amended, the “Loan Agreement”).  The Loan Agreement established 

a working capital line of credit in favor of Borrower in the

maximum principal amount of Seven Million Five Hundred Thousand Dollars

($7,500,000.00) (the “Committed Revolving Line”).  Capitalized terms used but not otherwise defined herein shall

have the same meaning as in the Loan Agreement.

 

Hereinafter, all indebtedness and obligations owing by Borrower to Bank

shall be referred to as the “Obligations”.

 

2.             DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is secured by

the Collateral as described in the Loan Agreement (together with any other

collateral security granted to Bank, the “Security Documents”).

 

Hereinafter, the Security Documents, together with all other documents

evidencing or securing the Obligations shall be referred to as the “Existing

Loan Documents”.

 

3.             DESCRIPTION OF CHANGE IN TERMS.

 

A.            Modifications to Loan Agreement.

 

1.             The Loan Agreement shall be amended

by deleting the following definition appearing in Section 1.1 thereof:

 

““ Maturity Date” means May 13, 2001.”

 

and inserting in lieu thereof the following:

 

““ Maturity Date” means May 13, 2002.”

 

2.             The Loan Agreement shall be amended by deleting the

following definition appearing in Section 1.1 thereof:

 

““Tangible Net Worth”

means as of any applicable date, the consolidated total assets of Borrower and

its Subsidiaries minus, without duplication, (i) the sum of any amounts

attributable to (a) goodwill, (b) intangible items such as unamortized debt

discount and expense, patents, trade and service marks and names, copyrights

and research and development expenses except prepaid expenses, and (c) all

reserves not already deducted from assets, and (ii) Total Liabilities; and

(iii) Other Assets, and (iv) tax assets, and (v) security deposits.”

 

and inserting in lieu thereof the following:

 

““Tangible Net Worth”

means as of any applicable date, the consolidated total assets of Borrower and

its Subsidiaries plus (A) Subordinated Debt, minus

(B), without duplication: (i) the sum of any amounts attributable to (a)

goodwill, (b) intangible items such as unamortized debt discount and expense,

patents, trade and service marks and names, copyrights and research and

development expenses except prepaid expenses, and (c) all reserves not already

deducted from assets, and (ii) Total Liabilities; and (iii) Other Assets, and

(iv) tax assets, and (v) security deposits.”

 

3.             The Loan Agreement shall be amended by deleting the

following text appearing as Section 6.9 and 6.10 thereof:

 

“6.9         [Intentionally

Deleted]

 

6.10         Profitability.  Borrower shall maintain, on a quarterly

basis, commencing with the quarter ending September 30, 2000, an operating

profit of not less than One Dollar ($1.00), which amount shall be exclusive of

certain acquisition costs approved by Bank, which shall include merger and

acquisition costs and goodwill attributed thereto as referenced on Borrower’s

Forecast Plan attached hereto as Exhibit E.”

 

and inserting in lieu

thereof the following:

 

“6.9          Tangible

Net Worth.  Borrower shall maintain

at all times, to be tested as of the last day of each calendar quarter, a

Tangible Net Worth of not less than Two Hundred Million Dollars

($200,000,000.00).

 

6.10 [Intentionally Deleted].”

 

4.             The Compliance Certificate appearing as Exhibit D

to the Loan Agreement is hereby replaced with the Compliance Certificate

attached as Exhibit A hereto.

 

4.             FEES.   Borrower shall pay to Bank a modification

fee equal to Eighteen Thousand Seven Hundred and Fifty Dollars ($18,750.00),

which fee shall be due on the date hereof and shall be deemed fully earned as

of the date hereof.  The Borrower shall

also reimburse Bank for all legal fees and expenses incurred in connection with

this amendment to the Existing Loan Documents.

 

5.             RATIFICATION

OF NEGATIVE PLEDGE.  Borrower hereby

ratifies, confirms and reaffirms, all and singular, the terms and conditions of

a certain Negative Pledge Agreement dated as of May 14, 1999, between Borrower

and Bank, and acknowledges, confirms and agrees that said Negative Pledge

Agreement shall remain in full force and effect.

 

6.             ADDITIONAL COVENANTS:

RATIFICATION OF PERFECTION CERTIFICATE. 

Borrower shall not: (i) without providing the Bank with thirty (30) days

prior written notice (A) relocate its principal executive office, or (B) change

its jurisdiction of organization, or (C) change its organizational structure or

type, (D) change its legal name, or (E) change any organizational number (if

any) assigned by its jurisdiction of organization, or (ii) without providing

the Bank with prior written notice thereafter, add any new offices or business

locations or keep any Collateral in any additional locations (unless such new

offices or business locations contain less than Twenty Thousand Dollars

($20,000.00) in Borrower’s assets or property).  In addition, the Borrower hereby certifies that no Collateral is

in the possession of any third party bailee (such as at a warehouse), except

that in the possession of SMTC Manufacturing Corporation of Canada.  In the event that Borrower, after the date

hereof, intends to store or otherwise deliver the Collateral to such a bailee,

then Borrower shall first receive, the prior written consent of Bank and such

bailee must acknowledge in writing that the bailee is holding such Collateral

for the benefit of Bank.

 

7.             AUTHORIZATION TO FILE.  Borrower hereby authorizes Bank to file

financing statements without notice to Borrower, with all appropriate

jurisdictions, as Bank deems appropriate, in order to further perfect or

protect Bank’s interest in the Collateral.

 

8.             CONCERNING REVISED ARTICLE 9 OF

THE UNIFORM COMMERCIAL CODE.  The Borrower affirms and reaffirms

that notwithstanding the terms of the Security Documents to the contrary, (i)

that the definition of “Code”, “UCC” or “Uniform Commercial Code” as set forth in

the Security Documents shall be deemed to mean and refer to “the Uniform

Commercial Code as adopted by The Commonwealth of Massachusetts (presently,

Mass. Gen. Laws. Ch. 106), as may be amended and in effect from time to time

and (ii) the Collateral is all assets of the Borrower.  In connection therewith, the Collateral

shall include, without limitation, the following categories of assets as

defined in the Code: goods (including inventory, equipment and any accessions

thereto), instruments (including promissory notes), documents, accounts

(including health-care-insurance receivables, and license fees), chattel paper

(whether tangible or electronic), deposit accounts, letter-of-credit rights

(whether or not the letter of credit is evidenced by a writing), commercial

tort claims, securities and all other investment property, general intangibles

(including payment intangibles and software), supporting obligations and any

and all proceeds of any thereof, wherever located, whether now owned or

hereafter acquired.

 

9.             CONSISTENT CHANGES.  The Existing Loan Documents are hereby

amended wherever necessary to reflect the changes described above.

 

10.           RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, and

reaffirms all terms and conditions of all security or other collateral granted

to the Bank, and confirms that the indebtedness secured thereby includes,

without limitation, the Obligations.

 

11.           NO DEFENSES OF BORROWER.  Borrower agrees that, as of this date, it

has no defenses against the obligations to pay any amounts under the

Obligations.

 

12.           CONTINUING VALIDITY.  Borrower understands and agrees that in

modifying the existing Obligations, Bank is relying upon Borrower’s

representations, warranties, and agreements, as set forth in the Existing Loan

Documents.  Except as expressly modified

pursuant to this Loan Modification Agreement, the terms of the Existing Loan

Documents remain unchanged and in full force and effect.  Bank’s agreement to modifications to the

existing Obligations pursuant to this 

Loan Modification Agreement in no way shall obligate Bank to make any

future modifications to the Obligations. 

Nothing in this Loan Modification Agreement shall constitute a

satisfaction of the Obligations.  It is

the intention of Bank and Borrower to retain as liable parties all makers of

Existing Loan Documents, unless the party is expressly released by Bank in

writing.  No maker will be released by

virtue of this Loan Modification Agreement.

 

13.           RIGHT

OF SET-OFF.  In consideration of

Bank’s agreement to enter into this Loan Modification Agreement, Borrower and

any guarantor hereby reaffirm and hereby grant to Bank, a lien, security

interest and right of setoff as security for all Obligations to Bank, whether

now existing or hereafter arising upon and against all deposits, credits,

collateral and property, now or hereafter in the possession, custody,

safekeeping or control of Bank or any entity under the control of Silicon

Valley Bank or in transit to any of them. 

At any time after the occurrence and during the continuance of an Event

of Default, without demand or notice, Bank may set off the same or any part

thereof and apply the same to any liability or obligation of Borrower and any

guarantor even though unmatured and regardless of the adequacy of any other

collateral securing the loan.  ANY AND

ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO

ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS

RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE

BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY

WAIVED.

 

14.           JURISDICTION/VENUE.  Borrower accepts for itself and in

connection with its properties, unconditionally, the non-exclusive jurisdiction

of any state or federal court of competent jurisdiction in the Commonwealth of

Massachusetts in any action, suit, or proceeding of any kind against it which

arises out of or by reason of this Loan Modification Agreement; provided,

however, that if for any reason Bank cannot avail itself of the courts of the

Commonwealth of Massachusetts, then venue shall lie in Santa Clara County,

California.  NOTWITHSTANDING THE

FOREGOING,  THE BANK SHALL HAVE THE

RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN

THE COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR

APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE

BANK’S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.

 

15.           COUNTERSIGNATURE.  This Loan Modification Agreement shall

become effective only when it shall have been executed by Borrower and Bank

(provided, however, in no event shall this Loan Modification Agreement become

effective until signed by an officer of Bank in California).

 

This Loan Modification Agreement is executed as a

sealed instrument under the laws of the Commonwealth of Massachusetts as of the

date first written above.

 

	

  BORROWER:

  	

   

  	

  BANK:

  
	

   

  	

   

  	

   

  
	

  NMS

  COMMUNICATIONS CORPORATION,

  	

   

  	

  SILICON

  VALLEY BANK, doing business as

  
	

  formerly

  known as NATURAL

  	

   

  	

  SILICON

  VALLEY EAST

  
	

  MICROSYSTEMS

  CORPORATION

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

   

  
	

  Name:

  	

   

  	

   

  	

  Name:

  	

   

  
	

   

  	

   

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  SILICON

  VALLEY BANK

  
	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  By:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Name:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

  Title:

  	

   

  
	

   

  	

   

  	

   

  	

  (signed in Santa Clara County, California)

  
											

 

EXHIBIT A

COMPLIANCE CERTIFICATE

 

TO:                         SILICON

VALLEY BANK

 

FROM:                   NATURAL

MICROSYSTEMS CORPORATION

 

                The

undersigned authorized officer of NATURAL MICROSYSTEMS CORPORATION hereby

certifies that in accordance with the terms and conditions of the Loan and

Security Agreement between Borrower and Bank (the “Agreement”),

(i) Borrower is in complete compliance for the period ending               

with all required covenants except as noted below and (ii) all

representations and warranties of Borrower stated in the Agreement are true and

correct in all material respects as of the date hereof.  Attached herewith are the required documents

supporting the above certification.  The

Officer further certifies that these are prepared in accordance with Generally

Accepted Accounting Principles (GAAP) and are consistently applied from one

period to the next except as explained in an accompanying letter or

footnotes.  The Officer expressly

acknowledges that no borrowings may be requested by  the Borrower at any time or 

date of determination that Borrower is not in compliance with any of the

terms of the Agreement, and that  such

compliance is determined not just  at

the date this certificate is delivered.

 

Please indicate compliance status by circling Yes/No under

“Complies” column.

 

	

  Reporting Covenant

  	

   

  	

  Required

  	

   

  	

  Complies

  	

   

  
	

  Financial Statements & CC

  	

   

  	

  Quarterly w/in 5 days of filing w/ SEC

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Annual (CPA Audited)

  	

   

  	

  Annually w/in 5 days of filing w/ SEC

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  10K, 10Q and 8K

  	

   

  	

  Within 5 days of filing w/ SEC

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  BBC & A/R Agings

  	

     

  	

  Quarterly w/in 15 days (when borrowing) and with

  each Advance request

  	

   

  	

  Yes

  	

   

  	

  No

  	

     

  
	

  Revised Budget or Forecast

  	

     

  	

  Within 30 days of approval by Management

  	

     

  	

  Yes

  	

   

  	

  No

  	

     

  

 

 

	

  Financial Covenant

  	

   

  	

  Required

  	

   

  	

  Actual

  	

   

  	

  Complies

  	

   

  
	

  Maintain:

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Minimum Quick Ratio (quarterly)

  	

   

  	

  2.0:1.0

  	

   

  	

  _____:1.0

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
	

  Tangible Net Worth 

  (at all times, tested quarterly)

  	

   

  	

  $

  	

  200,000,000.00

  	

   

  	

  $

  	

  ________

  	

   

  	

  Yes

  	

   

  	

  No

  	

   

  
												

 

 

	

  BANK

  USE ONLY

  	

   

  
	

  Received

  By:

  	

   

  	

   

  
	

  Date:

  	

   

  	

   

  
	

  Reviewed

  By:

  	

   

  	

   

  
	

  Compliance

  Status:  Yes / No

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Comments

  Regarding Exceptions:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Sincerely,

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

  Date:

  	

   

  
	

  SIGNATURE

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  TITLE

  	

   

  	

   

  	

   

  
	

  658261.3 (56120/82)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00031-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00031-of-00352.parquet"}]]