Document:

Exhibit
10.2

 

CHANGE OF CONTROL EMPLOYMENT
AGREEMENT (BE2-BE3)

 

CHANGE OF CONTROL EMPLOYMENT AGREEMENT, dated as of
the         
day of                       ,  20      
(this “Agreement”), by and between COMERICA INCORPORATED, a Delaware
corporation (the “Company”), and                                 
                  
(the “Executive”).

 

WHEREAS, the Board of Directors of the Company (the “Board”),
has determined that it is in the best interests of the Company and its
stockholders  to assure that the Company will
have the continued dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined herein).  The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive’s full attention and dedication to the Company
in the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the Executive
will be satisfied and that provide the Executive with compensation and benefits
arrangements that are competitive with those of other corporations.  Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

Section 1.     Certain Definitions.  (a) “Effective Date” means the first
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs.  Notwithstanding
anything in this Agreement to the contrary, if (A) the Executive’s employment
with the Company is terminated by the Company, (B) the Date of Termination
is prior to the date on which a Change of Control occurs, and (C) it is
reasonably demonstrated by the Executive that such termination of employment (i)
was at the request of a third party that has taken steps reasonably calculated
to effect a Change of Control or (ii) otherwise arose in connection with
or anticipation of a Change of Control (such a termination of employment, an “Anticipatory
Termination”), then for all purposes of this Agreement, the “Effective Date”
means the date immediately prior to such Date of Termination.

 

(b)           “Change of Control Period” means the
period commencing on the date hereof and ending on the third anniversary of the
date hereof; provided, however,
that, commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof, the “Renewal
Date”), unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless, at least 60 days prior to the Renewal Date, the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.

 

(c)           “Affiliated Company” means any company
controlled by, controlling or under common control with the Company.

 

(d)           “Change of Control” means:

 

 

(1)           Any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then-outstanding shares of
common stock of the Company (the “Outstanding Company Common Stock”) or (B) the
combined voting power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that, for purposes of this Section 1(d), the
following acquisitions shall not constitute a Change of Control:  (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Affiliated Company or (iv) any acquisition pursuant to a
transaction that complies with Sections 1(d)(3)(A), 1(d)(3)(B) and
1(d)(3)(C);

 

(2)           Individuals who, as of the date hereof,
constitute the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual was a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board;

 

(3)           Consummation of a reorganization, merger,
statutory share exchange or consolidation or similar transaction involving the
Company or any of its subsidiaries, a sale or other disposition of all or
substantially all of the assets of the Company, or the acquisition of assets or
stock of another entity by the Company or any of its subsidiaries (each, a “Business
Combination”), in each case unless, following such Business Combination, (A) all
or substantially all of the individuals and entities that were the beneficial
owners of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of the then-outstanding shares of
common stock (or, for a non-corporate entity, equivalent securities) and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors (or, for a non-corporate entity,
equivalent governing body), as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an entity that, as a
result of such transaction, owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the members of the
board of directors (or, for a non-corporate entity, equivalent governing body)
of the entity resulting from such Business

 

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Combination were members of the Incumbent
Board at the time of the execution of the initial agreement or of the action of
the Board providing for such Business Combination; or

 

(4)           Approval by the stockholders  of the Company of a complete liquidation or dissolution of
the Company.

 

Section 2.     Employment Period.  The Company hereby agrees to continue the
Executive in its employ, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the last day of
the thirtieth consecutive month following the Effective Date (the “Employment
Period”).  The Employment Period shall
terminate upon the Executive’s termination of employment for any reason.

 

Section 3.     Terms of Employment.  (a)  Position
and Duties.

 

(1)           During the Employment Period, (A) the
Executive’s position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all respects with the most significant of those held, exercised
and assigned at any time during the 120-day period immediately preceding the
Effective Date, and (B) the Executive’s services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or at any office or location less than 60 miles from such location.

 

(2)           During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities assigned to the Executive hereunder, to use
the Executive’s reasonable best efforts to perform faithfully and efficiently
such responsibilities.  During the
Employment Period, it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive’s
responsibilities as an employee of the Company in accordance with this
Agreement.  It is expressly understood
and agreed that, to the extent that any such activities have been conducted by
the Executive prior to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive’s responsibilities to the Company.

 

(b)           Compensation.  (1) 
Base Salary.  During the Employment Period, the
Executive shall receive an annual base salary (the “Annual Base Salary”) at an
annual rate at least equal to 26 times the highest bi-weekly base salary paid
or payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the
one-year period immediately preceding the month in which the Effective Date
occurs.  The Annual Base Salary shall be
paid to the Executive at such intervals as the Company pays executive salaries
generally, unless the Executive shall elect to defer the receipt of such Base
Salary pursuant to an arrangement that meets the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”).  During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12

 

3

 

months after the last salary increase
awarded to the Executive prior to the Effective Date.  Any increase in the Annual Base Salary shall
not serve to limit or reduce any other obligation to the Executive under this
Agreement.  The Annual Base Salary shall
not be reduced after any such increase and the term “Annual Base Salary” shall
refer to the Annual Base Salary as so increased.

 

(2)           Annual Bonus.  In
addition to the Annual Base Salary, the Executive shall be awarded, for each
fiscal year ending during the Employment Period, an annual bonus (the “Annual
Bonus”) in cash at least equal to the aggregate of the Executive’s highest
bonus under each of

 

(i)            the
Company’s Management Incentive Plan; and

 

(ii)           any business
unit incentive plan of the Company in which the Executive has participated during
any portion of the last three fiscal years (or any predecessor or successor
plan to any thereof), as applicable, for the last three full fiscal years prior
to the Effective Date, including any bonus or portion thereof that has been
earned but deferred (annualized in the event that the Executive was not
employed by the Company for the whole of such fiscal year and not otherwise
paid a full year’s bonus for such year) (the “Recent Annual Bonus”).  For purposes of determining the Recent Annual
Bonus, the highest bonus under the Management Incentive Plan shall be
determined by including bonuses earned for both the annual and multiyear
performance periods ending in each of the last three full fiscal years prior to
the Effective Date (or for such lesser number of full fiscal years prior to the
Effective Date for which the Executive was eligible to earn such a bonus and
annualized in the case of any pro rata bonus earned for a partial fiscal
year).  Each such Annual Bonus shall be
paid no later than two and a half months after the end of the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer
the receipt of such Annual Bonus pursuant to an arrangement that meets the
requirements of Section 409A of the Code.

 

(3)           Long-Term Equity Incentives,
Savings and Retirement Plans.  During the Employment Period, the
Executive shall be entitled to participate in all equity incentive, savings and
retirement plans, practices, policies, and programs applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in
each case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and the Affiliated Companies for the Executive under
such plans, practices, policies and programs as in effect at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated Companies.

 

(4)           Welfare Benefit Plans. 
During
the Employment Period, the Executive and/or the Executive’s family, as the case
may be, shall be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the
Company and the Affiliated Companies (including, without limitation, medical,
prescription, dental, disability, employee life, group life, accidental death
and travel accident insurance plans

 

4

 

and programs) to the extent applicable
generally to other peer executives of the Company and the Affiliated Companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits that are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for
the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the Company
and the Affiliated Companies.

 

(5)           Expenses. 
During
the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
accordance with the most favorable policies, practices and procedures of the
Company and the Affiliated Companies in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.

 

(6)           Fringe Benefits. 
During
the Employment Period, the Executive shall be entitled to fringe benefits,
including, without limitation, tax planning services, payment of club dues,
and, if applicable, use of an automobile and payment of related expenses, in
accordance with the most favorable plans, practices, programs and policies of
the Company and the Affiliated Companies in effect for the Executive at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and the Affiliated Companies.

 

(7)           Office and Support Staff. 
During
the Employment Period, the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least equal to the most favorable
of the foregoing provided to the Executive by the Company and the Affiliated
Companies at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as provided generally at
any time thereafter with respect to other peer executives of the Company and
the Affiliated Companies.

 

(8)           Vacation. 
During
the Employment Period, the Executive shall be entitled to paid vacation in
accordance with the most favorable plans, policies, programs and practices of
the Company and the Affiliated Companies as in effect for the Executive at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and the Affiliated
Companies.

 

Section 4.     Termination of Employment.  (a)  Death or
Disability.  The Executive’s
employment shall terminate automatically if the Executive dies during the Employment
Period.  If the Company determines in
good faith that the Disability (as defined herein) of the Executive has
occurred during the Employment Period (pursuant to the definition of “Disability”),
it may give to the Executive written notice in accordance with Section 11(b) of
its intention to terminate the Executive’s employment.  In such event, the Executive’s employment
with the Company shall terminate effective on the 30th day after receipt of
such

 

5

 

notice
by the Executive (the “Disability Effective Date”), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive’s duties.  “Disability” means the absence of the
Executive from the Executive’s duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive’s legal representative.

 

(b)           Cause. 
The
Company may terminate the Executive’s employment during the Employment Period with
or without Cause.  “Cause” means:

 

(1)           the willful and continued failure of the
Executive to perform substantially the Executive’s duties with the Company or
any Affiliated Company (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company that specifically identifies the manner in which the
Board or the Chief Executive Officer of the Company believes that the Executive
has not substantially performed the Executive’s duties, or

 

(2)           the willful engaging by the Executive in
illegal conduct or gross misconduct that is materially and demonstrably
injurious to the Company.

 

For purposes of this Section 4(b), no act, or
failure to act, on the part of the Executive shall be considered “willful”
unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s action or omission was in the
best interests of the Company.  Any act,
or failure to act, based upon (A) authority given pursuant to a resolution
duly adopted by the Board, or if the Company is not the ultimate parent
corporation of the Affiliated Companies and is not publicly-traded, the board
of directors of the ultimate parent of the Company (the “Applicable Board”), (B) the
instructions of the Chief Executive Officer of the Company or a senior officer
of the Company or (C) the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company.  The cessation of employment of the Executive
shall not be deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the Applicable
Board (excluding the Executive, if the Executive is a member of the Applicable
Board) at a meeting of the Applicable Board called and held for such purpose
(after reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel for the Executive, to be heard
before the Applicable Board), finding that, in the good faith opinion of the
Applicable Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.

 

(c)           Good Reason. 
The
Executive’s employment may be terminated during the Employment Period by the
Executive for Good Reason or by the Executive voluntarily without Good
Reason.  “Good Reason” means:

 

(1)           the assignment to the Executive of any
duties inconsistent in any respect with the Executive’s position (including
status, offices, titles and reporting

 

6

 

requirements),
authority, duties or responsibilities as contemplated by Section 3(a), or
any action by the Company that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and that is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

 

(2)           any failure by the Company to comply with
any of the provisions of Section 3(b), other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and that is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

 

(3)           the Company’s requiring the Executive to
be based at any office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company’s requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;

 

(4)           any purported termination by the Company
of the Executive’s employment otherwise than as expressly permitted by this
Agreement; or

 

(5)           any failure by the Company to comply with
and satisfy Section 10(c).

 

For purposes of this Section 4(c) of
this Agreement, any good faith determination of Good Reason made by the
Executive shall be conclusive.  The Executive’s mental or physical
incapacity following the occurrence of an event described above in clauses (1) through
(5) shall not affect the Executive’s ability to terminate employment for
Good Reason.

 

(d)           Notice of Termination. 
Any
termination by the Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 11(b).  “Notice
of Termination” means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the
provision so indicated, and (3) if the Date of Termination (as defined
herein) is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice).  The failure by
the Executive or the Company to set forth in the Notice of Termination any fact
or circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive’s or the Company’s respective rights
hereunder.

 

(e)           Date of Termination. “Date of Termination” means (1) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or such later date
specified in the Notice of Termination, as the case may be, (2) if the
Executive’s employment is terminated by the Company other than for Cause or
Disability, the date on which the Company notifies the Executive of such
termination, (3) if the Executive resigns without Good Reason, the date on

 

7

 

which the Executive notifies the Company
of such termination, and (4) if the Executive’s employment is terminated
by reason of death or Disability, the date of death of the Executive or the
Disability Effective Date, as the case may be. 
Notwithstanding the foregoing, in no event shall the Date of Termination
occur until the Executive experiences a “separation from service” within the
meaning of Section 409A of the Code, and notwithstanding anything contained
herein to the contrary, the date on which such separation from service takes
place shall be the “Date of Termination.”

 

Section 5.     Obligations of the Company upon Termination.  (a)  By the Executive for
Good Reason; By the Company Other Than for Cause, Death or Disability.  If, during the Employment Period, the Company
terminates the Executive’s employment other than for Cause, Death or Disability
or the Executive terminates employment for Good Reason:

 

(1)           the
Company shall pay to the Executive, in a lump sum in cash within 30 days after
the Date of Termination, the aggregate of the following amounts:

 

(A)          the
sum of (i) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid or deferred pursuant to an irrevocable
election under any deferred compensation arrangement subject to Section 409A,
(ii) any accrued vacation pay to the extent not theretofore paid (the sum
of the amounts described in subclauses (i) and (ii), the “Accrued
Obligations”) and (iii) an amount equal to the product of (x) the
higher of (I) the Recent Annual Bonus and (II) the aggregate Annual
Bonus under each of the Company’s Management Incentive Plan and any business
unit incentive plan of the Company in which the Executive has participated (or any predecessor or successor plan to
any thereof) paid or payable, including any bonus or portion thereof that has
been earned but deferred (and annualized for any fiscal year consisting of less
than 12 full months or during which the Executive was employed for less than 12
full months), for the most recently completed fiscal year during the Employment
Period, if any, (it being understood that, such Annual Bonus shall be
determined by including bonuses earned for both the annual and multiyear performance
periods ending in such recently completed fiscal year during the Employment
Period)  (such higher amount, the “Highest
Annual Bonus”) and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination and the
denominator of which is 365 (the “Pro Rata Bonus”); and

 

(B)           the
amount equal to the product of (i) two  and (ii) the
sum of (x) the Executive’s Annual Base Salary and (y) the Highest
Annual Bonus.

 

(2)           [FOR THE AGREEMENTS OF EXECUTIVES COMMENCING EMPLOYMENT PRIOR TO JANUARY
1, 2007:  the Company shall
pay to the Executive, at such time as such amounts are payable under the terms
of each applicable SERP (as defined below), or, if the Executive

 

8

 

does not participate in
a SERP, in a lump sum in cash within 30 days after the Date of Termination, an
amount equal to the excess of (i) the actuarial equivalent of the benefit
under the Company’s qualified defined benefit retirement plan (the “Retirement
Plan”) (utilizing actuarial assumptions no less favorable to the Executive than
those in effect under the Retirement Plan immediately prior to the Effective
Date) and any excess or supplemental retirement plan in which the Executive
participates (collectively, the “SERP”) (utilizing actuarial assumptions no
less favorable to the Executive than those in effect under the SERP immediately
prior to the Effective Date) that the Executive would receive if the Executive’s
employment continued for two years after the Date of Termination, assuming for
this purpose that (x) the accrued
benefit is fully vested, (y) the Executive’s age is increased by
the number of years (including partial years) that the Executive is deemed to
be so employed and (z) the Executive’s compensation in each of the two
years is that required by Sections 3(b)(1) and 3(b)(2) payable in
equal biweekly installments over
such two-year period, over (ii) the actuarial equivalent of the Executive’s
actual benefit (paid or payable), if any, under the Retirement Plan and the
SERP as of the Date of Termination;]

 

[FOR THE
AGREEMENTS OF EXECUTIVES COMMENCING EMPLOYMENT ON OR AFTER JANUARY 1,
2007:  the Company shall pay
to the Executive, at such time as such amounts are payable under the terms of
each applicable SERP (as defined below),
or, if the Executive does not participate in a SERP, in a lump sum in
cash within 30 days after the Date of Termination, an amount equal to the excess of (i) the account balance under the
Company’s qualified defined contribution retirement plan (the “Defined
Contribution Plan”) and any excess or supplemental defined contribution
plan in which the Executive participates (collectively, the “SERP”) that the Executive would receive if the
Executive’s employment continued for two years after the Date of Termination,
assuming for this purpose that (x) the account balance is fully vested, (y)
the Company makes a nonelective employer contribution to the SERP for each year
in such two-year period in an amount equal to the greatest nonelective employer
contribution made to such plan during the last two full fiscal years prior to
the Effective Date and (z) the Executive’s compensation in each of the two
years is that required by Section 3(b)(1) and Section 3(b)(2) payable
in equal biweekly installments for such two-year period, over (ii) the
account balance (paid or payable), if any, under the Defined Contribution Plan
and the SERP as of the Date of Termination;]

 

(3)           during the two year period following the Date of
Termination (the “Benefits Period”), the Company shall provide the Executive,
his spouse and his eligible dependents with medical and dental insurance
coverage (the “Health Care Benefits”) and life insurance benefits no less
favorable to those which the Executive, his spouse and his eligible dependents
were receiving immediately prior to the Date of Termination or,
if more favorable to such persons, as in effect generally at any time
thereafter with respect to other peer executives of the Company and the
Affiliated Companies; provided, however, that the Health
Care Benefits shall be provided during the Benefits Period
in such a manner that such benefits are excluded from the Executive’s income
for federal income tax purposes; provided, further, however,
that if the Executive becomes re-employed

 

9

 

with another employer
and is eligible to receive health care benefits under another employer-provided
plan, the health care benefits provided hereunder shall be secondary to those
provided under such other plan during such applicable period of eligibility.  The
receipt of the Health Care Benefits shall be conditioned upon the Executive
continuing to pay the monthly
premium as in effect at the Company from time to time for coverage provided to
former employees under Section 4980B of the Code  in
respect of the maximum level of coverage that the Executive could otherwise
elect to receive for the Executive, his spouse and eligible dependents if the
Executive were still an employee of the Company during the Benefits Period (i.e., single, single plus one, or family) (the “Applicable
COBRA Premium”) regardless of what level of coverage is actually elected.  During the portion of
the Benefits Period in which the Executive, his spouse and his eligible
dependents continue to receive coverage under the Company’s Health Care Benefits
plans, the Company shall pay to the Executive a monthly amount equal to the excess of (x) the Applicable COBRA
Premium over (y) the monthly employee contribution rate that is paid by
Company employees generally for the same or similar coverage, as in effect from
time to time
(and which amount shall in no event be greater than the employee
contribution rate for the applicable level of coverage as in effect immediately
prior to the Effective Date), which payment shall be paid in advance on the
first payroll day of each month, commencing with the month immediately
following the Executive’s Date of Termination.  The Company shall use its
reasonable best efforts to ensure that, following the end of the Benefit
Period, the Executive shall be eligible to elect continued health coverage
pursuant to Section 4980B of the Code or other applicable law (“COBRA
Coverage”), as if the Executive’s employment with the Company had terminated as
of the end of such period.  For purposes
of determining eligibility (but not the time of commencement of benefits) of
the Executive for retiree welfare benefits pursuant to the Company’s retiree
welfare benefit plans, if any, the Executive shall be considered to have
remained employed until the end of the Benefit Period and to have retired on
the last day of such period.  In order to
comply with Section 409A of the Code, (i) the amount of benefits that
the Company is obligated to provide under this Section 5(a)(3) in any
given calendar year shall not affect the amount of such benefits that the
Company is obligated to pay in any other calendar year; and (ii) the
Executive’s right to have the Company provide such benefits may not be
liquidated or exchanged for any other benefit; and

 

(4)           the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in the Executive’s sole
discretion, provided that such outplacement benefits
shall end not later than the last day of the second calendar year that begins
after the Date of Termination; and

 

(5)           except as otherwise set forth in the last
sentence of Section 6, to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any Other Benefits (as
defined in Section 6) in accordance with the terms of the underlying plans
or agreements.

 

10

 

Notwithstanding the foregoing provisions of Sections 5(a)(1), (2) or
(3), in the event that the Executive is a “specified employee” within the
meaning of Section 409A of the Code (as determined in accordance with the
methodology established by the Company as in effect on the Date of Termination)
(a “Specified Employee”), amounts that constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code that would
otherwise be payable and benefits that would otherwise be provided under
Sections 5(a)(1), (2) or (3) during the six-month period immediately
following the Date of Termination (other than the Accrued Obligations) shall
instead be paid, with interest on any delayed payment at the applicable federal
rate provided for in Section 7872(f)(2)(A) of the Code (“Interest”)
determined as of the Date of Termination, or provided on the first business day
after the date that is six months following the Executive’s “separation from
service” within the meaning of Section 409A of the Code (the “Delayed
Payment Date”).

 

(b)           Death. 
If the Executive’s employment is terminated by reason of the Executive’s
death during the Employment Period, the Company shall provide the Executive’s
estate or beneficiaries with the Accrued Obligations and the Pro Rata Bonus and
the timely payment or delivery of the Other Benefits, and shall have no other
severance obligations under this Agreement. 
The Accrued Obligations and the Pro Rata Bonus shall be paid to the
Executive’s estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination.  With
respect to the provision of the Other Benefits, the term “Other Benefits” as
utilized in this Section 5(b) shall include, without limitation, and
the Executive’s estate and/or beneficiaries shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the Company
and the Affiliated Companies to the estates and beneficiaries of peer
executives of the Company and the Affiliated Companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive’s estate and/or the Executive’s beneficiaries,
as in effect on the date of the Executive’s death with respect to other peer
executives of the Company and the Affiliated Companies and their beneficiaries.

 

(c)           Disability.  If the Executive’s employment is
terminated by reason of the Executive’s Disability during the Employment
Period, the Company shall provide the Executive with the Accrued Obligations
and Pro Rata Bonus and the timely payment or delivery of the Other Benefits in
accordance with the terms of the underlying plans or agreements, and shall have
no other severance obligations under this Agreement.  The Accrued Obligations and the Pro Rata
Bonus shall be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination, provided, that
in the event that the Executive is a Specified Employee, the Pro Rata Bonus
shall be paid, with Interest, to the Executive on the Delayed Payment
Date.  With respect to the provision of
the Other Benefits, the term “Other Benefits” as utilized in this Section 5(c) shall
include, and the Executive shall be entitled after the Disability Effective
Date to receive, disability and other benefits at least equal to the most
favorable of those generally provided by the Company and the Affiliated Companies
to disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive’s family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and the Affiliated Companies and their families.

 

11

 

(d)           Cause;
Other Than for Good Reason.  If
the Executive’s employment is terminated for Cause during the Employment
Period, the Company shall provide the Executive with the Executive’s Annual
Base Salary through the Date of Termination, and the timely payment or delivery
of the Other Benefits, and shall have no other severance obligations under this
Agreement.  If the Executive voluntarily
terminates employment during the Employment Period, excluding a termination for
Good Reason, the Company shall provide to the Executive the Accrued Obligations
and the Pro Rata Bonus and the timely payment or delivery of the Other Benefits,
and shall have no other severance obligations under this Agreement.  In such case, all the Accrued Obligations and
the Pro Rata Bonus shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination, provided, that
in the event that the Executive is a Specified Employee, the Pro Rata Bonus
shall be paid, with Interest, to the Executive on the Delayed Payment Date.

 

Section 6.     Non-exclusivity of
Rights.  Nothing in this
Agreement shall prevent or limit the Executive’s continuing or future
participation in any plan, program, policy or practice provided by the Company
or the Affiliated Companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect
such rights as the Executive may have under any other contract or agreement with
the Company or the Affiliated Companies. 
Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any other
contract or agreement with the Company or the Affiliated Companies at or
subsequent to the Date of Termination (“Other Benefits”) shall be payable in
accordance with such plan, policy, practice or program or contract or
agreement, except as explicitly modified by this Agreement.  Without limiting the generality of the
foregoing, the Executive’s resignation under this Agreement with or without
Good Reason, shall in no way affect the Executive’s ability to terminate
employment by reason of the Executive’s “retirement” under, or to be eligible
to receive benefits under, any compensation and benefits plans, programs or
arrangements of the Company or the Affiliated Companies, including without
limitation any retirement or pension plans or arrangements or substitute plans
adopted by the Company, the Affiliated Companies or their respective
successors, and any termination which otherwise qualifies as Good Reason shall
be treated as such even if it is also a “retirement” for purposes of any such
plan.  Notwithstanding the foregoing, if
the Executive receives payments and benefits pursuant to Section 5(a) of
this Agreement, the Executive shall not be entitled to any severance pay or
benefits under any severance plan, program or policy of the Company and the
Affiliated Companies, unless otherwise specifically provided therein in a
specific reference to this Agreement.

 

Section 7.     Full Settlement; Legal Fees.  The
Company’s obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense, or other claim, right or action
that the Company may have against the Executive or others.  In no event shall the Executive be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and except as specifically provided in Section 5(a)(2), such amounts shall
not be reduced whether or not the Executive obtains other employment.  The Company agrees to pay as incurred (within
10 days following the Company’s receipt of an invoice from the Executive), at
any time from the Change of Control through the Executive’s remaining lifetime
(or, if longer, through the 20th anniversary of the Change of
Control) to the full extent permitted by law, all 

 

12

 

legal
fees and expenses that the Executive may reasonably incur as a result of any
contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus, in each case, Interest determined as of the date such
legal fees and expenses were incurred; provided, that
the Executive shall have submitted an invoice for such fees and expenses at
least 10 days before the end of the calendar year next following the calendar
year in which such fees and expenses were incurred (or, in connection with a
contest related to an Anticipatory Termination, following the calendar year in
which such contest is finally resolved). 
The amount of such legal fees and expenses that the Company is obligated
to pay in any given calendar year shall not affect the legal fees and expenses
that the Company is obligated to pay in any other calendar year, and the
Executive’s right to have the Company pay such legal fees and expenses may not
be liquidated or exchanged for any other benefit.

 

Section 8.     Certain Additional Payments
by the Company.

 

(a)           Anything
in this Agreement to the contrary notwithstanding and except as set forth
below, in the event it shall be determined that any Payment would be subject to
the Excise Tax, then the Executive shall be entitled to receive an additional
payment (the “Gross-Up Payment”) in an amount such that, after payment by the
Executive of all taxes (and any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, but excluding any income taxes and penalties imposed pursuant
to Section 409A of the Code, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.  Notwithstanding the foregoing provisions of
this Section 8(a), if it shall be determined that the Executive is
entitled to the Gross-Up Payment, but that the Parachute Value of all Payments
does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall
be made to the Executive and the amounts payable under this Agreement shall be
reduced so that the Parachute Value of all Payments, in the aggregate, equals
the Safe Harbor Amount.  The reduction of
the amounts payable hereunder, if applicable, shall be made by reducing the
payments and benefits under the following sections in the following order: (i) Section 5(a)(1)(B),
(ii) Section 5(a)(1)(C), (iii) Section 5(a)(1)(A)(v) and
(iv) Section 5(a)(2).  For
purposes of reducing the Payments to the Safe Harbor Amount, only amounts
payable under this Agreement (and no other Payments) shall be reduced.  If the reduction of the amount payable under
this Agreement would not result in a reduction of the Parachute Value of all
Payments to the Safe Harbor Amount, no amounts payable under the Agreement
shall be reduced pursuant to this Section 8(a) and the  Executive shall be entitled to the Gross-Up
Payment.  The Company’s obligation to
make Gross-Up Payments under this Section 8 shall not be conditioned upon
the Executive’s termination of employment.

 

(b)           Subject
to the provisions of Section 8(c), all determinations required to be made
under this Section 8, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by Ernst &
Young LLP, or such other nationally recognized certified public accounting firm
as may be designated by the Executive (the “Accounting Firm”).  The Accounting Firm shall provide detailed
supporting calculations both to the Company and the 

 

13

 

Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment or such earlier time as is requested by the Company.  In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive may appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm
shall be borne solely by the Company. 
Any determination by the Accounting Firm shall be binding upon the
Company and the Executive.  As a result
of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the Company
should have been made (the “Underpayment”), consistent with the calculations
required to be made hereunder.  In the
event the Company exhausts its remedies pursuant to Section 8(c) and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive.

 

(c)           The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company
of the Gross-Up Payment.  Such
notification shall be given as soon as practicable, but no later than 10
business days after the Executive is informed in writing of such claim.  The Executive shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid.  The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which
the Executive gives such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:

 

(1)           give
the Company any information reasonably requested by the Company relating to such
claim,

 

(2)           take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

 

(3)           cooperate
with the Company in good faith in order effectively to contest such claim; and

 

(4)           permit
the Company to participate in any proceedings relating to such claim;

 

provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest, and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties) imposed as a result of such representation and payment
of costs and expenses.  Without
limitation on the foregoing provisions of this Section 8(c), the Company
shall control all proceedings taken in connection with such contest, and, at
its sole 

 

14

 

discretion, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the applicable taxing authority in
respect of such claim and may, at its sole discretion, either pay the tax
claimed to the appropriate taxing authority on behalf of the Executive and
direct the Executive to sue for a refund or to contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however,
that, if the Company pays such claim and directs the Executive to sue for a
refund, the Company shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties) imposed with respect to such payment or with respect to any imputed
income in connection with such payment; and provided, further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount.  Furthermore, the
Company’s control of the contest shall be limited to issues with respect to
which the Gross-Up Payment would be payable hereunder, and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.

 

(d)           If,
after the receipt by the Executive of a Gross-Up Payment or payment by the
Company of an amount on the Executive’s behalf pursuant to Section 8(c),
the Executive becomes entitled to receive any refund with respect to the Excise
Tax to which such Gross-Up Payment relates or with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of Section 8(c),
if applicable) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto).  If, after payment by the
Company of an amount on the Executive’s behalf pursuant to Section 8(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then the amount of such payment shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid.

 

(e)           Any
Gross-Up Payment, as determined pursuant to this Section 8, shall be paid
by the Company to the Executive within five days of the receipt of the
Accounting Firm’s determination; provided
that, the Gross-Up Payment shall in all events be paid no later than the end of
the Executive’s taxable year next following the Executive’s taxable year in
which the Excise Tax (and any income or other related taxes or interest or
penalties thereon) on a Payment are remitted to the Internal Revenue Service or
any other applicable taxing authority or, in the case of amounts relating to a
claim described in Section 8(c) that does not result in the
remittance of any federal, state, local and foreign income, excise, social
security and other taxes, the calendar year in which the claim is finally
settled or otherwise resolved. 
Notwithstanding any other provision of this Section 8, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of any Gross-Up Payment, and the Executive hereby
consents to such withholding.

 

(f)            Definitions.  The following terms shall have the following
meanings for purposes of this Section 8.

 

15

 

(i)            “Excise Tax” shall
mean the excise tax imposed by Section 4999 of the Code, together with any
interest or penalties imposed with respect to such excise tax.

 

(ii)           “Parachute Value”
of a Payment shall mean the present value as of the date of the change of
control for purposes of Section 280G of the Code of the portion of such
Payment that constitutes a “parachute payment” under Section 280G(b)(2),
as determined by the Accounting Firm for purposes of determining whether and to
what extent the Excise Tax will apply to such Payment.

 

(iii)          A “Payment” shall
mean any payment or distribution in the nature of compensation (within the
meaning of Section 280G(b)(2) of the Code) to or for the benefit of
the Executive, whether paid or payable pursuant to this Agreement or otherwise.

 

(iv)          The “Safe Harbor
Amount” means 2.99 times the Executive’s “base amount,” within the meaning of Section 280G(b)(3) of
the Code.

 

Section 9.     Confidential Information.  The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to the Company
or the Affiliated Companies, and their respective businesses, which
information, knowledge or data shall have been obtained by the Executive during
the Executive’s employment by the Company or the Affiliated Companies and which
information, knowledge or data shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement).  After termination of
the Executive’s employment with the Company, the Executive shall not, without
the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or
data to anyone other than the Company and those persons designated by the
Company.  In no event shall an asserted
violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.

 

Section 10.     Successors.  (a) 
This Agreement is personal to the Executive, and, without the prior written
consent of the Company, shall not be assignable by the Executive other than by
will or the laws of descent and distribution. 
This Agreement shall inure to the benefit of and be enforceable by the
Executive’s legal representatives.

 

(b)           This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.  Except as
provided in Section 10(c), without the prior written consent of the
Executive this Agreement shall not be assignable by the Company.

 

(c)           The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.  “Company” means the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
assumes and agrees to perform this Agreement by operation of law or otherwise.

 

16

 

Section 11.     Miscellaneous.  (a) 
This Agreement shall be governed by and construed in accordance with the laws
of the State of Delaware, without reference to principles of conflict of laws.  The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect.  Subject to the last sentence of Section 11(h),
this Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal representatives.

 

(b)           All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

 

if to the Executive:

 

At the most recent address on file at the
Company.

 

if to the Company:

 

Comerica Incorporated

Comerica Bank Tower

1717 Main Street, MC 6404

Dallas, Texas 
75201

Attention: 
General Counsel

 

or to such other address as either party shall have furnished to the
other in writing in accordance herewith. 
Notice and communications shall be effective when actually received by
the addressee.

 

(c)           The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.

 

(d)           The
Company may withhold from any amounts payable under this Agreement such United
States federal, state or local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

 

(e)           The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or
the Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Sections 4(c)(1) through
4(c)(5), shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.

 

(f)            The
Executive and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is “at will” and, subject to Section 1(a),
prior to the Effective Date, the Executive’s employment may be terminated by
either the 

 

17

 

Executive
or the Company at any time prior to the Effective Date, in which case the
Executive shall have no further rights under this Agreement.  From and after the Effective Date, except as
specifically provided herein, this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof in
effect immediately prior to the execution of this Agreement.

 

(g)          The Agreement is intended to comply with the requirements
of Section 409A of the Code or an exemption or exclusion therefrom and
shall in all respects be administered in accordance with Section 409A of
the Code.  Each payment under this
Agreement shall be treated as a separate payment for purposes of Section 409A
of the Code.  In no event may the
Executive, directly or indirectly, designate the calendar year of any payment
to be made under this Agreement.  If the
Executive dies following the Date of Termination and prior to the payment of
the any amounts delayed on account of Section 409A of the Code, such
amounts shall be paid to the personal representative of the Executive’s estate
within 30 days after the date of the Executive’s death.  All reimbursements and in-kind benefits that
constitute deferred compensation within the meaning of Section 409A
provided under this Agreement shall be made or provided in accordance with the
requirements of Section 409A of the Code, including, without limitation,
that (i) in no event shall reimbursements by the Company under this
Agreement be made later than the end of the calendar year next following the
calendar year in which the applicable fees and expenses were incurred, provided,
that the Executive shall have submitted an invoice for such fees and expenses
at least 10 days before the end of the calendar year next following the
calendar year in which such fees and expenses were incurred; (ii) the
amount of in-kind benefits that the Company is obligated to pay or provide in
any given calendar year shall not affect the in-kind benefits that the Company
is obligated to pay or provide in any other calendar year; (iii) the
Executive’s right to have the Company pay or provide such reimbursements and
in-kind benefits may not be liquidated or exchanged for any other benefit; and (iv) in
no event shall the Company’s obligations to make such reimbursements or to
provide such in-kind benefits apply later than the Executive’s remaining lifetime
(or if longer, through the 20th anniversary of the Effective Date).  Prior to the Effective Date but within the
time period permitted by the applicable Treasury Regulations, the Company may,
in consultation with the Executive, modify the Agreement, in the least restrictive
manner necessary and without any diminution in the value of the payments to the
Executive, in order to cause the provisions of the Agreement to comply with the
requirements of Section 409A of the Code, so as to avoid the imposition of
 taxes and penalties on the Executive
pursuant to Section 409A of the Code.

 

Section 12.     Survivorship.  Upon
the expiration or other termination of this Agreement or the Executive’s
employment, the respective rights and obligations of the parties hereto shall
survive to the extent necessary to carry out the intentions of the parties
under this Agreement.

 

18

 

IN WITNESS WHEREOF, the Executive has
hereunto set the Executive’s hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be executed in its
name on its behalf, all as of the day and year first above written.

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name of
  Executive]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  COMERICA INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  

 

19Exhibit 10.1

 

EMPLOYMENT
AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”), is made and entered into as of
October 6, 2008 (the “Effective Date”),
by and between SPACEHAB Incorporated, a Washington corporation (hereafter “Company”) and Thomas B. Pickens, III
(hereafter “Executive”). The
Company and Executive may sometimes hereafter be referred to singularly as a “Party” or collectively as the “Parties.”

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to continue to
secure the employment services of Executive subject to the terms and conditions
hereafter set forth; and

 

WHEREAS, the Executive is willing to enter
into this Agreement upon the terms and conditions hereafter set forth;

 

NOW, THEREFORE, in consideration of Executive’s
employment with the Company, and the premises and mutual covenants contained
herein, the Parties hereto agree as follows:

 

1.                                      Employment. During the Employment
Period (as defined in Section 4 hereof) and subject to the terms
and conditions herein, the Company shall employ Executive as, and Executive
agrees to serve as, an employee of the Company with the titles of Chairman and
Chief Executive Officer.

 

2.                                      Compensation.

 

(a)                                 Base Salary. The Company shall pay to Executive during the Employment Period a base
salary at a rate of not less than $360,000 per annum for calendar year 2008
(the “Base Salary”). The Base
Salary shall be payable monthly in accordance with the Company’s normal payroll
schedule for its executives. Executive’s Base Salary for subsequent years may
be increased (but not decreased) annually at the discretion of the Compensation
Committee (the “Compensation Committee”)
of the Company’s Board of Directors (the “Board”) based
upon a review, at least annually, by the Compensation Committee of Executive’s
performance. Nothing contained herein shall preclude the payment of any other
compensation to Executive at any time as determined by the Compensation
Committee.

 

(b)                                  Annual Bonus. In addition to the Base Salary, for each calendar year during the
Employment Period (as defined in Section 4), Executive shall be
entitled to a bonus (referred to herein as the “Annual Bonus”). The Annual Bonus, if any, shall be established
by the Compensation Committee based on Executive’s and/or Company’s performance
as may be determined and approved by the Compensation Committee based on
performance goals and criteria set by the Compensation Committee. Executive’s
targeted Annual Bonus potential shall be up to fifty percent (50%) of his Base
Salary for each year during the Employment Period.  The Annual Bonus may be paid at any time or
from time to time during the year at the discretion of the Compensation
Committee.

 

In the event that the Employment
Period ends before the end of a calendar year, Executive shall be entitled to a
prorata portion of the Annual Bonus potential for that year (based on the
number of days in which Executive was employed during the year divided by 365)
as determined based on satisfaction of the performance criteria for that period
on a prorata basis, unless Executive was terminated for Cause (as defined in Section 6(f)),
in which event Executive shall not be entitled to any Annual Bonus for that
year. Executive acknowledges that the amount and performance criteria for
Executive’s Annual Bonus to be earned for each Bonus Period shall be set by the
Compensation Committee.  If Executive
successfully meets the 

 

 

performance criteria established
by the Compensation Committee, the Company shall pay Executive the earned
Annual Bonus amount as determined by the Compensation Committee within the
earlier of: (i) sixty days (60) days after the end of the calendar year or
(ii) sixty days (60) after the end of the Employment Period, as
applicable.

 

(c)                                  Long-Term Incentive Compensation. In addition to Sections
2(a) and 2(b), Executive shall receive from time to time awards
of long-term incentive compensation, as commensurate with Executive’s
employment position, and as determined by the Compensation Committee, as
follows:

 

(1)                             On July 18, 2008, Executive received an
Incentive Award (an “Other Stock-Based Award”)
under the Company’s 2008 Stock Incentive Plan, or any successor thereto (the “2008 Plan”), of 1,100,000 Shares (as such
term is defined in the 2008 Plan) (the “Common Stock Grant”).
Such Common Stock Grant shall not be subject to vesting conditions.

 

(2)                                  The Common Stock Grant shall be subject to the
terms and conditions of the 2008 Plan and an Incentive Award Agreement attached
as Exhibit A hereto.

 

(3)                                 On July 18, 2008, Executive received an
Incentive Award under the 2008 Plan of Nonstatutory Stock Options to acquire
100,000 Shares under the 2008 Plan including “reload” features (“Reload Options”) as set forth in the Incentive Award
Agreement documenting such award (the “Incentive Award Agreement”).
The Reload Options shall vest in accordance with the terms of the Incentive
Award Agreement.

 

(4)                                 The Executive shall be entitled to participate, as
commensurate with Executive’s employment position and performance as determined
by the Compensation Committee, in every other incentive and stock-based
long-term compensation program (the “LTC Program”)
of the Company in accordance with the Company’s practice for administering the
LTC Program with respect to Executive Officers. For purposes of this Agreement,
“LTC Program” encompasses the plans, programs and awards described in the
preceding provisions of this Section 2(c) and any successor
plans and programs thereto.

 

(d)                                 Initial Cash Bonus. In addition to the foregoing compensation
described in this Section 2, on [date], Executive received a single cash
bonus of $350,000.

 

3.                                      Duties and Responsibilities of Executive.
During the Employment Period, Executive will serve as Chairman and Chief
Executive Officer of the Company and will perform responsibilities consistent
with such position as limited by this Agreement. The Company and its Affiliates
understand and agree that Executive has and will have existing commitments to
other companies requiring similar services. Accordingly, Executive is not
required to devote his services on a full-time basis to the business of the
Company and its Affiliates, but shall devote his primary business
attention and energies to the discharge of Executive’s duties and
responsibilities to the Company and its Affiliates as assigned by the Board and
consistent with the positions of Chairman and Chief Executive Officer. In
determining Executive’s duties and responsibilities, Executive shall not be
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position as described in this
Agreement. Nothing in this Agreement shall be construed as preventing Executive
from (a) engaging in volunteer services for charitable, educational or
civic organizations, (b) serving on the board of directors of other
companies, (c) investing his personal assets in such a manner as he deems
to be appropriate, or (d) being employed or engaged by other companies;
provided, however, no such other activity shall conflict with Executive’s obligations
under the first and third sentences of this Section 3 and under Sections
10 through 17.  Subject to any
contrary permissive or mandatory provision of this Agreement, Executive shall
at all times use best efforts to comply in good faith with United States laws
as understood by Executive and applicable to Executive’s actions on behalf of
the Company and its Affiliates (as defined in Section 6(f)).
Executive understands and agrees that Executive may be required to travel from
time to time for purposes of the Company’s business.

 

4.                                 Term of Employment. Subject to the terms and conditions of this
Agreement, Executive’s initial term of employment with the Company under this
Agreement shall be for the period from the Effective Date through October     ,
2010 (the “Initial Term of Employment”).
On the second anniversary of the Effective Date and on each subsequent
anniversary of the Effective Date (such second anniversary date and each such
subsequent anniversary date being referred to as a “Renewal Date”)
the Agreement shall be automatically extended by a one-year renewal term (each
an “Additional Term”), unless, not
less than sixty (60) days prior to the relevant Renewal Date, (i) either
Party shall have given written notice to the other that no such automatic
extension shall occur after the date of such notice or (ii) either party
shall have given a Notice of Termination to the other pursuant to Section 7.  Each Party shall have the right to give
Notice of Termination (pursuant to Section 7) at will, with or
without Cause, at any time subject, however, to the terms and conditions of
this Agreement regarding the rights and duties of the Parties upon termination
of employment. The period from the Effective Date through the date of Executive’s
termination of employment with the Company and all Affiliates, for whatever
reason, shall be referred to herein as the “Employment
Period.”

 

5.                                 Benefits. Subject to the terms and conditions of this
Agreement, during the Employment Period, Executive shall be entitled to all of
the following:

 

(a)                                 Reimbursement of Business Expenses. The Company shall pay or reimburse Executive
promptly and in a manner consistent with the Company’s Travel and Entertainment
Expense Policy, as in effect at such time, for all reasonable travel,
transportation, lodging, entertainment, food and other business expenses paid
or incurred by Executive in the performance of Executive’s duties hereunder
including without limitation, travel, transportation, lodging, entertainment,
food and other business expenses for Executive to attend conventions,
conferences and meetings that the Compensation Committee determines are
appropriate or in the best interest of the Company.  The Company may delay such payment or reimbursement
pending receipt of reasonable substantiation and documentation for such
expenses consistent with Company policy.  
The Company shall also provide Executive with suitable office space
within 35 miles of his residence, secretarial and other staff support and paid
parking.

 

(b)                                 Other Employee Benefits. Executive shall be entitled to participate at
Company’s expense in any pension, retirement, 401(k), profit-sharing, and other
employee benefits plans or programs of the Company available to other officers
of the Company under the terms and conditions of such plans or programs.
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participate in, and Company shall
pay the premiums, expenses and charges for, any group insurance, hospitalization,
medical, dental, health, life, accident, disability and other employee benefits
or fringe benefits plans or programs of the Company available to other officers
of the Company under the terms and conditions of such plans or programs.

 

(c)                                  Vacation and Holidays. Executive shall be entitled to four (4) weeks
of paid vacation per calendar year which, if not taken, shall accrue from year
to year consistent with Company policy, provided in no event may Executive’s
vacation accrual exceed a maximum of five (5) weeks at any time.  Executive shall also be entitled to all paid
holidays and sick time provided by the Company for its officers under the
Company’s holiday and sick time policy as in effect at such time.

 

(d)                                 Automobile Allowance. Executive shall be entitled to an automobile
allowance of $1,000 per month.  Such
allowance will be payable via payroll check on the first pay date of each
calendar month.

 

6.                                 Rights and Payments upon Termination. In
addition to other amounts payable under this Agreement, the Executive’s
right to compensation and benefits for periods after the date on which
Executive’s employment terminates with the Company and all Affiliates (the “Termination
Date”), shall be determined in accordance with this Section 6, as
follows:

 

(a)                                 Minimum Payments. In all events, Executive shall be entitled to the
following minimum payments under this Section 6(a), in addition to
any other payments or benefits to which Executive is entitled to receive under
the terms of Section 6(b) or any employee benefit plan or
program:

 

(1)                                  an amount equal to the Executive’s Base Salary (as
in effect immediately prior to the Termination Date) for the payroll period
containing the Termination Date (i.e., payment of salary for the final payroll
period), with such amount to be calculated through the end of such payroll
period;

 

(2)                                  unpaid vacation days which have accrued during the
Employment Period, up to a maximum of five (5) weeks; and

 

(3)                                  reimbursement of business expenses of the type
described in Section 5(a) that were incurred but unpaid as of the
Termination Date.

 

(4)                                  an amount equal to any termination fees or expenses
incurred by Executive in connection with termination of any then-existing
automobile lease for Executive’s primary vehicle, up to and including payments
for the remaining term of such lease.

 

Subject to application of Section 38
hereof, Base Salary, accrued vacation days and any amount described in Section 6(a)(4) shall
be paid to Executive within ten (10) business days following the Termination
Date in a cash lump sum less applicable withholdings.  Business expenses shall be reimbursed in
accordance with the Company’s normal procedures, but in any event shall be paid
in full to Executive within thirty (30) calendar days following the Termination
Date, provided the Company shall have no obligation to reimburse business
expenses unless and until Executive provides Company with proper substantiation
and documentation of such expenses consistent with Company policy.

 

	
   

  	
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(b)                                 Other Severance Payments.  During the
Term of Employment, in the event that (i) Executive’s employment is
involuntarily terminated by the Company (except due to a “No Severance Benefits
Event” (as defined in Section 6(f)), (ii) Executive’s
employment is terminated due to his death or “Disability” (as defined in Section 6(f)),
or (iii) Executive terminates his own employment hereunder for “Good
Reason” (as defined in Section 6(f)), then in any such event under
clause (i), (ii) or (iii), the following severance benefits shall be
provided to Executive or, in the event of his death before receiving all such
benefits, to his “Designated Beneficiary” (as defined in Section 6(f))
following his death:

 

(1)                                  The Company shall pay to Executive as additional
compensation (the “Additional Payment”),
an amount equal to one (1) times the sum of:

 

(A)                              the Executive’s highest Base Salary as in effect at
any time within 12 months before the Termination Date; plus

 

(B)                                an amount determined by the Compensation Committee
in its discretion based upon factors including its subjective evaluation of the
Executive’s past and present job performance, the Company’s then-current cash
position, and other factors deemed relevant to such determination by the
Compensation Committee, with such amount to be in a range of from 0% to 50% of
the annualized average of the Annual Bonuses paid or payable to the Executive
for the three years immediately preceding the year in which the Termination Date
occurs.

 

Subject to
application of Section 38 hereof, the Company shall make the
Additional Payment to Executive in a cash lump sum payment, net of tax
withholdings, within thirty (30) calendar days following the Termination Date.

 

(2)                                  The Company shall maintain continued group health
plan coverage following the Termination Date under all plans subject to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) (as codified in Code Section 4980B)
for Executive and his eligible spouse and dependents for the maximum period for
which such qualified beneficiaries are eligible to receive COBRA coverage (the “Continuation
Period”).  For the initial twelve (12)
months of the Continuation Period (or, in the event of a termination of employment
that requires payment of an Additional Payment described in Section 6(c) hereunder,
then for the initial eighteen (18) months of the Continuation Period),
Executive (and his spouse and dependents) shall not be required to pay more for
such COBRA coverage than is charged by the Company to its officers who are then
in active service for the Company and receiving coverage under such plan and,
therefore, the Company shall be responsible for paying the difference between
the amount charged hereunder and the full COBRA premiums, which difference
shall be additional compensation to Executive. 
Beginning with the thirteenth (13th) month of the
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5

 

termination of employment that requires
payment of an Additional Payment described in Section 6(c) hereunder,
beginning with the nineteenth (19th) month of the Continuation
Period) and continuing thereafter for the duration of the Continuation Period,
if any, Executive shall be responsible for payment of full COBRA premiums
without contribution by the Company.   In
all other respects, Executive (and his spouse and dependents) shall be treated
the same as other COBRA qualified beneficiaries under the terms of such plans
and the requirements of COBRA. In the event of any change to a group health
plan following the Termination Date, Executive and his spouse and dependents,
as applicable, shall be treated consistently with the then-current officers of
the Company with respect to the terms and conditions of coverage and other
substantive provisions of the plan. Executive and his spouse hereby agree to
acquire and maintain any and all coverage that either or both of them are
entitled to at any time under a group health plan maintained by a successor
employer of Executive.

 

(3)                                  For purposes of clarity, in the event that (i) Executive
voluntarily resigns or otherwise voluntarily terminates his own employment
hereunder, except for Good Reason or due to his death or Disability (as such
terms are defined in Section 6(f)), or (ii) Executive’s
employment is terminated due to a No Severance Benefits Event (as defined in Section 6(f)),
then, in either such event under clause (i) or (ii), the Company shall
have no obligation to provide the severance benefits described in paragraphs (1) and
(2) (above) of this Section 6(b), except to offer COBRA
coverage (as required by COBRA law) but not at the special discounted rate
described in paragraph (2). Executive shall still be entitled to the severance
benefits provided under Section 6(a) in any event.

 

(4)                                  Any stock option, restricted stock, restricted
stock unit, warrant, stock appreciation right, or other equity-based
compensation previously awarded to Executive will vest upon the Termination
Date. Each stock option will remain exercisable for one (1) year after the
Termination Date, subject to the earlier expiration of the term of such stock
option. All other equity and other LTC Program awards shall be governed by the
applicable terms of award under which they were granted.

 

(5)                                  The severance payments provided under this
Agreement shall supersede and replace any severance payments under any
severance pay plan or policy that the Company or any Affiliate maintains for
employees generally.

 

(c)                                  Change in Control. Notwithstanding any provision hereof to the
contrary if the employment of Executive is terminated, voluntarily or
involuntarily, within twelve (12) months following a Change in Control (as
defined in Section 6(f)), for any reason other than due to his death or
Disability, then:

 

(1)                                  the Additional Payment (described in Section 6(b)(1))
shall be computed as one and one-half (1.5) times, rather than one (1) times,
the sum of the amounts described in Sections 6(b)(1)(A) and 6(b)(1)(B).  For avoidance of doubt, the amount resulting
from the 

 

	
   

  	
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6

 

foregoing calculation shall be
payable in lieu of, rather than in addition to, the Additional Payment as calculated
under the express terms of Section 6(b)(1).

 

(2)                                  The other provisions of Section 6 shall
continue to apply.

 

(d)                                 Release Agreement. Notwithstanding any provision of this Agreement
to the contrary, in order to receive the severance benefits payable under
either Section 6(b) or Section 8, as applicable,
the Executive must first execute an appropriate release agreement (on a form
provided by the Company) whereby the Executive agrees to release and waive, in
return for such severance benefits, any claims that he may have against the
Company including, without limitation, for unlawful discrimination (e.g., Title VII of the Civil Rights Act);
provided, however, such release agreement shall not release any claim or cause
of action by or on behalf of the Executive for (a) any payment or benefit
that may be due or payable under this Agreement or any employee benefit plan
prior to the receipt thereof, (b) any willful failure by the Company to
cooperate with Executive in exercising his vested stock options, RSUs or other
Incentive Awards under the LTP Program in accordance with their terms, (c) non-payment
of salary or benefits to which he is entitled from the Company as of the
Termination Date, or (d) a breach of this Agreement by the Company.

 

(e)                                  Continuation of D&O Coverage. In the event the employment of Executive is
terminated for any reason other than for Cause, the Company will acquire
extended coverage (“tail” coverage) having at least a six-year term for acts or
omissions occurring at or prior to the Termination Date with respect to
Executive’s actions or omissions as a director and officer of the Company on
terms that are substantially similar to those contained in the Company’s and
the Executive’s supplemental director and officer liability policies in effect
as of the Termination Date.

 

(f)                                    Definitions.

 

(1)                             “Affiliate”
means any entity, in whatever form, which the Company controls or has a direct
or indirect beneficial ownership of 10% or more of the voting equity interests.

 

(2)                             “Cause” means any of the following: (A) the
Executive’s conviction by a court of competent jurisdiction as to which no
further appeal can be taken of a felony, or entering the plea of nolo contendere to such crime by the
Executive, provided in either event the crime results from official actions
taken by the Executive in connection with the business of the Company; (B) the
proof by a preponderance of the evidence of commission by the Executive of an
intentional and deliberate material fraud, or an intentional and deliberate
material misappropriation of funds or property, of or upon the Company or any
Affiliate; or (C) the willful and continued failure of Executive to
perform substantially the Executive’s duties to the Company or its Affiliates
in accordance with this Agreement (other than by reason of Executive’s illness
or incapacity) after a written demand for substantial performance is delivered
to the Executive by the Board which specifically identifies the manner in which
the Board believes that the Executive has not substantially performed the
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7

 

the time period set by the
Company but in no event less than 30 calendar days after Executive’s receipt of
such demand. For purposes of this definition, no act or failure to act, on the
part of the Executive, shall be considered “willful” unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or any committee thereof or based upon the
advice of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best interests of
the Company.

 

(3)                             “Change in Control”
means a Change in Control of the Company which has the same definition of such
term as defined in the 2008 Plan, provided, however, that with
respect to any aspect of the definition of such term, in the event that (i) this
Agreement satisfies the definition of a “deferred compensation plan” under Code
Section 409A, and (ii) the definition of “Change in Control” provided
in the Final Regulations to Code Section 409A (the “409A Regulations”), as
amended from time to time, sets forth a higher or more restrictive standard for
a Change of Control, then the definition of such term provided in the 409A
Regulations shall apply.

 

(4)                             “Code” means the Internal Revenue Code of 1986, as
amended, or its successor. References herein to any Section of the Code
shall include any successor provisions of the Code.

 

(5)                             “Designated Beneficiary” means the Executive’s surviving
spouse, if any. If there is no such surviving spouse at the time of Executive’s
death, then the Designated Beneficiary hereunder shall be Executive’s estate.

 

(6)                             “Disability” shall mean that Executive is entitled to
receive long-term disability (“LTD”) income benefits under the LTD plan or policy
maintained by the Company that covers Executive. If, for any reason, Executive
is not covered under such LTD plan or policy, then “Disability”
shall mean a “permanent and total disability” as defined in Section 22(e)(3) of
the Code and Treasury regulations thereunder. Evidence of such Disability shall
be certified by a physician acceptable to both the Company and Executive. In
the event that the Parties are not able to agree on the choice of a physician,
each shall select one physician who, in turn, shall select a third physician to
render such certification. All costs relating to the determination of whether
Executive has incurred a Disability shall be paid by the Company. Executive
agrees to submit to any examinations that are reasonably required by the
physician to determine whether Executive has a Disability.

 

(7)                                  “Dispute” means any dispute, disagreement, claim, or
controversy arising in connection with or relating to the Agreement or
employment of Executive, or the termination of his employment, or the validity,
interpretation, performance, breach, or termination of the Agreement.

 

(8)                                  “Good Reason” means, except in connection with
termination 

 

	
   

  	
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8

 

of the Executive’s employment for
Cause or Disability, the occurrence of any of the events set forth below:

 

(A)                              if not cured by the Company within thirty (30) days
following Executive’s written notice, a material diminution in the Executive’s
powers, duties, authority, responsibilities, functions, relative position in
the Company’s management structure, status, reporting relationship to the
Board, office, title, scope of responsibility over corporate level staff or
operations functions, or any other material diminution in the Executive’s
position, authority, duties, or responsibilities; for purposes of clarity and
not limitation, if (i) the Company becomes a division, a wholly or
majority-owned subsidiary, or other similar entity of another person or entity
or combination thereof and (ii) after such reorganization the Executive is
not placed in a substantially equivalent position with the parent entity or
reorganized combination entity as he had with the Company immediately prior to
such reorganization, then such occurrence shall be deemed a material diminution
in Executive’s position for purposes of this definition of Good Reason);

 

(B)                                the Company requires the Executive to be based at
any office or location farther than 35 miles from the Executive’s principal
residence, except for required business travel to an extent substantially
consistent with the Executive’s travel obligations immediately before the
Change in Control;

 

(C)                                a reduction in the Executive’s Base Salary or
Annual Bonus opportunity from the highest amount in effect at any time during
the 12-month period prior to the Change in Control; or ;

 

(D)                               the failure of the Company to obtain from any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company the express assumption and agreement to perform this Agreement in the
same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.

 

Notwithstanding the foregoing definition of “Good
Reason”, the Executive cannot terminate his employment hereunder for Good
Reason unless he (i) first notifies the Compensation Committee in writing
of the event (or events) which the Executive believes constitutes a Good Reason
event under subparagraphs (A), (B) (C) or (D) (above) within 90
days from the date of such event, and (ii) provides the Company with at
least 30 calendar days to cure, correct or mitigate the Good Reason event so
that it either (1) does not constitute a Good Reason event hereunder or (2) Executive
agrees, in writing, that after any such modification or accommodation made by
the Company, such event shall not constitute a Good Reason event.

 

For purposes of clarity, none of the events
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of “Good Reason” shall be deemed to be an
exception to, or preclude a determination of, the occurrence of a Change in
Control.

 

(9)                             “No Severance Benefits Event” means termination of
Executive’s employment by the Company for Cause (as defined above).

 

7.                                      Notice of Termination. Any
termination by the Company or the Executive shall be communicated by Notice of
Termination to the other Party hereto. For purposes of this Agreement, the term
“Notice of Termination” means a
written notice which indicates the specific termination provision of this
Agreement relied upon, and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s
employment.  In the event of a
non-renewal of the Agreement pursuant to Section 3 hereof, a Notice of
Termination shall be delivered not less than sixty (60) days prior to the
relevant Renewal Date.  Any Notice of
Termination of the Executive for Cause shall not be effective unless and until
there shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith and reasonable opinion of the Board, the
Executive is guilty of the conduct described in the definition of Cause, and
specifying the particulars of such conduct in detail.

 

8.                                      Severance Benefits Following Nonrenewal of Agreement. In
the event that (a) this Agreement is not renewed by the Company (pursuant
to Section 4) for any reason other than a “No Severance Benefits
Event” (as defined in Section 6(f)) and (b) the employment of
Executive is subsequently terminated by the Company, for any reason other than
a No Severance Benefits Event, within one (1) year following the
expiration of the Initial Term of Employment or any Additional Term hereunder
due to nonrenewal by the Company, then Executive shall be entitled to severance
benefits (hereafter, the “Nonrenewal
Severance Benefits”), provided that he first enters into a release
agreement pursuant to Section 6(d). The Nonrenewal Severance
Benefits shall be computed in the same manner as severance benefits are
computed under Section 6(b). 
In the event of a termination of employment as described in this Section 8,
Executive shall still be entitled to the benefits under Section 6(b)(2) for
discounted COBRA coverage for the twelve-month period set forth in Section 6(b)(2).

 

9.                                      No Mitigation.
Executive shall not be required to mitigate the amount of any compensation,
benefits or other payments that Executive may have otherwise earned under this
Agreement, by seeking other employment or in any other manner. In no event
shall the amounts payable to the Executive under any of the provisions of this
Agreement be reduced if Executive obtains other employment.

 

10.                          Restrictive Covenants. As
an inducement to the Company to enter into this Agreement, Executive represents
to, and covenants with or in favor of, the Company that Executive will comply
with all of the restrictive covenants in Sections 10 through 17, as a
condition to the Company’s obligation to provide any benefits to Executive
under this Agreement.

 

	
   

  	
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11.                               Confidential Information.

 

(a)                                 Access to Confidential Information. As of the Effective Date and on an ongoing basis,
the Company agrees to give Executive access to Confidential Information which
the Executive did not have access to, or knowledge of, before the Effective
Date.

 

(b)                                 [Not used]

 

(c)                                  Agreement Not to Use or Disclose Confidential
Information. In exchange for
the Company’s promises to provide Executive with access to Confidential
Information and the other consideration and benefits provided to Executive
under this Agreement, Executive agrees that during the Restricted Period (as
defined in Section 11(e), except on behalf of the Company or as
Executive reasonably believes to be necessary or appropriate to further the
interests of the Company, Executive shall not disclose to anyone, including,
without limitation, any person, firm, corporation or other entity, or publish
or use for any purpose, any Confidential Information, except as required in the
ordinary course of the Company’s Business (as defined in subsection (e) below),
as authorized by the Company, or if such information becomes available to the
public by other means other than a breach by Executive.  Notwithstanding the foregoing, Confidential
Information may be disclosed in response to an order by a court of law, or
other governmental body, as otherwise required by law, or as necessary to
establish the rights of Executive under this Agreement or with respect to the
Company and its Affiliates, provided, however, if disclosure of Confidential
Information is sought by order of a court or governmental body, Executive shall
provide Company with notice of such request promptly upon receipt, so as to
allow Company to seek a protective order or injunctive relief.

 

(d)                                 Agreement to Refrain from Defamatory Statements. Executive shall refrain, both during the Employment
Period and thereafter, from publishing any oral or written statements about any
directors, officers, employees, agents, investors or representatives of the
Company or any Affiliate that are slanderous, libelous, or defamatory; or that
disclose private or confidential information about the Business, directors,
officers, employees, agents, investors or representatives of the Company or any
Affiliate; or that constitute an intrusion into the seclusion or private lives
of any such person; or that give rise to unreasonable publicity about the
private lives of such persons; or that place any such person in a false light
before the public; or that constitute a misappropriation of the name or
likeness of any such person. A violation or threatened violation of these
restrictive covenants may be enjoined disclosed in response to an order by a
court of law.

 

(e)                                  Definitions. The following terms, when used in this Agreement, are defined below:

 

(1)                            “Business” means (A) the design, manufacture, lease
and operation of pressurized and unpressurized space modules, flight hardware
and subsystems, and those other businesses and activities that are described in
the Company’s Form 10-K for the fiscal year ended June 30, 2007, and Form 10-Q
for the quarter ending December 31, 2007, or (B) any 

 

	
   

  	
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similar, incidental or related business
conducted or pursued by, or engaged in, or proposed to be conducted or pursued
by or engaged in, by the Company or an Affiliate at any time during the
Employment Period.

 

(2)                                  “Competitive Business” means any business which competes,
directly or indirectly, with the Business in the Market.

 

(3)                                  “Confidential Information” means any Trade Secret,
confidential study, data, calculations, software storage media or other
compilation of information, patent, patent application, copyright, trademark,
trade name, service mark, service name, “know-how”, customer lists, details of
client or consultant contracts, pricing policies, sales techniques,
confidential information relating to suppliers, information relating to the
special and particular needs of the Company’s or Affiliate’s customers
operational methods, marketing plans or strategies, products and formulae,
product development techniques or plans, business acquisition plans or any
portion or phase of any scientific or technical information, ideas, discoveries,
designs, computer programs (including source of object codes), processes,
procedures, research or technical data, improvements or other proprietary or
intellectual property of the Company or an Affiliate, whether or not in written
or tangible form, and whether or not registered, and including all files,
records, manuals, books, catalogues, memoranda, notes, summaries, plans,
reports, records, documents and other evidence thereof. The term “Confidential
Information” does not include, and there shall be no obligation hereunder with
respect to, any information or matter listed in the foregoing definition that (i) is
or becomes publicly known through no fault of the Executive, (ii) was
rightfully in the Executive’s possession or part of his general knowledge prior
to his employment by the Company, (iii) is disclosed to the Executive
without confidential or proprietary restriction by a third party, or (iv) is
developed by the Executive independently of and without any reference to any of
the Confidential Information.

 

(4)                                  “Market” means any county in the United States of America
and each similar jurisdiction in any other country in which the Business was
conducted or pursued by the Company or an Affiliate prior to the Termination
Date, or is conducted or engaged in or pursued, or is proposed to be conducted
or engaged in or pursued, by the Company or an Affiliate at any time during the
Employment Period.

 

(5)                                  “Restricted Period” means the period commencing on the
Effective Date of this Agreement and continuing through the one-year
anniversary of the Termination Date.

 

(6)                                  “Restricted Territory” means the United States of
America.

 

(7)                            “Trade Secrets” shall have the meaning ascribed such term
by the Supreme Court of Texas.

 

	
   

  	
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12

 

12.                               Duty to Return Company Documents
and Property. Upon termination
of the Employment Period, Executive shall immediately return and deliver to the
Company any and all papers, books, records, documents, memoranda and manuals,
e-mail, electronic or magnetic recordings or data, including all copies
thereof, belonging to the Company or an Affiliate or relating to its business,
in Executive’s possession or control, whether prepared by Executive or others.
If at any time after the Employment Period, Executive determines that he has
any Confidential Information in his possession or control, Executive shall
immediately return it to the Company, including all copies thereof.

 

13.                               Best Efforts and Disclosure. Executive agrees that, while employed by the
Company, Executive’s services shall be principally devoted to the Business as
set forth in Section 3, and Executive shall use best efforts to promote
its success.  Further, Executive shall
promptly disclose to the Company all ideas, inventions, computer programs, and discoveries,
whether or not patentable or copyrightable, which Executive may conceive or
make, alone or with others, during the Employment Period, whether or not during
working hours, and which directly or indirectly:

 

(a)                                  relate to a matter within the Business, scope,
field, duties or responsibility of Executive’s employment with the Company; or

 

(b)                                 are based on any knowledge of the actual or
anticipated Business or interests of the Company; or

 

(c)                                  are aided by the use of time, materials, facilities
or information of the Company.

 

Executive assigns to the Company, without
further compensation, any and all rights, titles and interest in all such
ideas, inventions, computer programs and discoveries in all countries of the
world. Executive recognizes that all ideas, inventions, computer programs and
discoveries of the type described above, conceived or made by Executive alone
or with others within 12 months after the Termination Date (voluntary or
involuntary), are likely to have been conceived in significant part either
while employed by the Company or as a direct result of knowledge Executive had
of Confidential Information. Accordingly, Executive agrees that such ideas,
inventions or discoveries shall be presumed to have been conceived during the
Employment Period, unless and until the contrary is clearly established by the
Executive.

 

14.                          Inventions and Other Works. Any
and all writings, computer software, inventions, improvements, processes,
procedures and/or techniques which Executive may make, conceive, discover, or
develop, either solely or jointly with any other person or persons, at any time
during the Employment Period, whether at the request or upon the suggestion of
the Company or otherwise, which relate to or are useful in connection with any
Business now known or hereafter carried on or expressly contemplated by the
Company, including developments or expansions of its present fields of
operations, shall be the sole and exclusive property of the Company. Executive
agrees to take any and all actions necessary or appropriate so that the Company
can prepare and present applications for copyright or Letters Patent therefor,
and secure such copyright or Letters Patent wherever possible, as well as
reissue renewals, and extensions thereof, and obtain the record title to such 

 

	
   

  	
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13

 

copyright or patents. Executive shall not be
entitled to any additional or special compensation or reimbursement regarding
any such writings, computer software, inventions, improvements, processes,
procedures and techniques. Executive acknowledges that the Company from time to
time may have agreements with other persons or entities which impose
obligations or restrictions on the Company regarding inventions made during the
course of work thereunder or regarding the confidential nature of such work.
Executive agrees to be bound by all such obligations and restrictions, and to
take all action necessary to discharge the obligations of the Company.

 

15.                         Non-Solicitation Restriction. To
protect Confidential Information, it is necessary to enter into the following
restrictive covenants, which are ancillary to the enforceable promises between
the Company and Executive in Sections 10 through 17 and other provisions
of this Agreement.  During the Restricted
Period, Executive hereby covenants and agrees that he will not, directly or
indirectly, without the prior written consent of the Board, either individually
or as a principal, partner, agent, consultant, contractor, employee, or as a
director or officer of any entity, or in any other manner or capacity
whatsoever, except on behalf of the Company or an Affiliate, solicit, divert,
or appropriate, or attempt to solicit, divert, or appropriate, for the purposes
of providing products or services that are the same as or substantially similar
to the types of products or services provided in the Business, any person or
entity that Executive is consciously aware was a customer of the Company or an
Affiliate during the portion of the Employment Period included in the two (2) years
immediately preceding the actual or attempted solicitation, diversion or
appropriation.

 

16.                         Non-Competition Restriction.
Executive hereby agrees that in order to protect Confidential Information, it
is necessary to enter into the following restrictive covenant, which is
ancillary to the enforceable promises between the Company and Executive in Sections
10 through 17 and other provisions of this Agreement. Executive hereby
covenants and agrees that during the Restricted Period, Executive will not,
without the prior written consent of the Board, become interested in any
capacity in which Executive would perform any similar duties to those performed
while at the Company, directly or indirectly (whether as proprietor,
stockholder, director, partner, employee, agent, independent contractor,
consultant, trustee, or in any other capacity), with respect to any Competitive
Business; provided, however, Executive shall not be deemed to be participating
or engaging in a Competitive Business solely by virtue of the ownership of not
more than one percent (1%) of any class of stock or other securities which are
publicly traded on a national securities exchange or in a recognized
over-the-counter market.

 

17.                         No-Recruitment Restriction.
Executive agrees that during the Restricted Period, Executive will not, either
directly or indirectly, or by acting in concert with others, solicit or
influence, or seek to solicit or influence, any employee or independent
contractor performing services for the Company or any Affiliate to terminate,
reduce or otherwise adversely affect such employment or other relationship with
the Company or Affiliate.

 

18.                         Tolling. If Executive violates any of the restrictions contained in Sections
10 through 17, then notwithstanding any provision hereof to the contrary,
the Restricted Period will be suspended and will not run in favor of Executive
from the time of the commencement of any such violation, unless and until such
time when the Executive cures the violation to the reasonable satisfaction of
the Company, which cannot be 

 

	
   

  	
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14

 

unreasonably withheld by the Company.

 

19.                         Reformation. If a
court or arbitrator rules that any time period, the geographic area or any
prohibited activities specified in any restrictive covenant in Sections 10
through 17 is unenforceable, then the time period will be reduced by the
number of months, the geographic area will be reduced by the elimination of
such unenforceable portion, and/or the prohibited activities will be limited by
elimination of any such unenforceable portion, so that the restrictions may be
enforced in the geographic area, for the time, and pertaining to the prohibited
activities to the full extent permitted by law.

 

20.                          No Previous Restrictive
Agreements. Executive
represents that, except as disclosed in writing to the Company as of the
Effective Date, Executive is not bound by the terms of any agreement with any
previous employer or other third party to (a) refrain from using or
disclosing any confidential or proprietary information previously obtained by
Executive in such capacity during the course of his employment by the Company
or (b) refrain from competing, directly or indirectly, with the business
of such previous employer or any other person or entity. Executive further
represents that his duties for the Company hereunder do not, and will not,
breach any agreement to keep in confidence proprietary information that was acquired
by Executive in confidence or in trust prior to Executive’s employment by the
Company; and Executive shall not disclose to the Company, or induce the Company
to use, any confidential or proprietary information or material belonging to
any previous employer or other third party.

 

21.                          Conflicts of Interest. In
keeping with Executive’s duties to Company, Executive hereby agrees that
Executive shall not become involved in a conflict of interest, or upon
discovery thereof, allow such a conflict to continue at any time during the
Employment Period.  If Executive becomes
aware of any conflict of interest affecting the performance of his duties
hereunder, Executive agrees to promptly disclose the details of such conflict
to the Board.

 

22.                          Remedies. Executive acknowledges that the restrictions
contained in Sections 10 through 17 of this Agreement, in view of the
nature of the Company’s Business, are reasonable and necessary to protect the
Company’s legitimate Business interests, and that any violation of such
Sections would result in irreparable injury to the Company. In the event of a
breach or a threatened breach by Executive of any provision of Sections 10
through 21 of this Agreement, the Company shall be entitled to a temporary
restraining order and injunctive relief restraining Executive from the
commission of such breach. In the event the Company is successful in obtaining
an order from a court of competent jurisdiction granting any such injunctive
relief (other than by agreement of the Parties), the Company may recover its
reasonable and necessary attorneys’ fees, court costs and reasonable and
necessary expenses related to the breach or threatened breach as found by the
court. If Executive is successful in resisting any effort made by the Company
to obtain injunctive relief, then Executive may recover his reasonable attorney’s
fees, court costs and other reasonable and necessary expenses. Nothing
contained in this Agreement shall be construed as prohibiting any Party from
pursuing any other remedies available to it for any such breach or threatened
breach, including, without limitation, the recovery of money damages, attorneys’
fees, and costs. These covenants and agreements shall each be construed as
independent of any other provisions in this Agreement.

 

23.                          Withholdings; Right of  Offset. The Company may withhold and deduct 

 

	
   

  	
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15

 

from any benefits and payments made or to be
made pursuant to this Agreement (a) all federal, state, local and other
taxes as may be required pursuant to any law or governmental regulation or
ruling, (b) all other normal employee deductions made with respect to
Company’s employees generally, and (c) any advances made to Executive and
owed to Company; however, the Company shall promptly notify Executive in
writing of any such withholding or deduction under this subsection (c).

 

24.                          Nonalienation. Except for Executive’s estate planning purposes
to which the Company shall not unreasonably withhold its consent, the right to
receive payments under this Agreement shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge or encumbrance by
Executive, dependents or beneficiaries of Executive, or to any other person who
is or may become entitled to receive such payments hereunder. The right to
receive payments hereunder shall not be subject to or liable for the debts,
contracts, liabilities, engagements or torts of any person who is or may become
entitled to receive such payments, nor may the same be subject to attachment or
seizure by any creditor of such person under any circumstances, and any such
attempted attachment or seizure shall be void and of no force and effect.

 

25.                          Incompetent or Minor Payees. Should the Company determine, in its discretion,
that any person to whom any payment is payable under this Agreement has been
determined to be legally incompetent or is a minor, any payment due hereunder,
notwithstanding any other provision of this Agreement to the contrary, may be
made in any one or more of the following ways: (a) directly to such minor
or person; (b) to the legal guardian or other duly appointed personal
representative of the person or estate of such minor or person; or (c) to
such adult or adults as have, in the good faith knowledge of the Company,
assumed custody and support of such minor or person; and any payment so made
shall constitute full and complete discharge of any liability under this
Agreement to the full extent of the amount so paid.

 

26.                          Severability. It is the desire of the Parties hereto that this
Agreement be enforced to the maximum extent permitted by law, and should any
provision or any portion thereof contained herein be held unenforceable by a
court of competent jurisdiction, the parties hereby agree and consent that such
provision or portion thereof shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided,
however, if such provision cannot be reformed, it shall be deemed ineffective and
deleted herefrom without affecting any other provision of this Agreement. This
Agreement should be construed by limiting and reducing it only to the minimum
extent necessary to be enforceable under then applicable law.

 

27.                          Title and Headings; Construction. Titles and headings to sections and subsection
hereof are for the purpose of reference only and shall in no way limit, define
or otherwise affect the provisions hereof. The words “herein”, “hereof”, “hereunder”
and other compounds of the word “here” shall refer to the entire Agreement and
not to any particular provision.

 

28.                          Governing Law; Jurisdiction. All matters or issues relating to the
interpretation, construction, validity, and enforcement of this Agreement shall
be governed by the laws of the State of Texas, without giving effect to any
choice-of-law principle that would cause the application of the laws of any
jurisdiction other than Texas. Jurisdiction and venue of any action or
proceeding relating to this Agreement or any Dispute shall be 

 

	
   

  	
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16

 

exclusively in Houston, Texas or in Austin,
Texas.

 

29.                          Maintenance of D&O Insurance
Coverage. During the
Employment Period, the Company shall maintain directors and officers liability
insurance in commercially reasonable amounts and terms (as reasonably
determined by the Board), and the Executive shall be covered under such
insurance to the same extent as other senior management employees of the
Company.

 

30.                          Binding Effect; Third Party
Beneficiaries. This Agreement
shall be binding upon and inure to the benefit of the Parties hereto, and to
their respective heirs, executors, beneficiaries, personal representatives,
successors and permitted assigns hereunder, but otherwise this Agreement shall
not be for the benefit of any third parties.

 

31.                          Entire Agreement; Amendment and
Termination. This Agreement
and the Exhibits hereto contain the entire agreement of the Parties hereto with
respect to the matters covered herein; moreover, this Agreement supersedes all
prior and contemporaneous agreements and understandings, oral or written,
between the Parties concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument that is identified
as an amendment, waiver or termination hereto, and is executed by both Parties.

 

32.                          Survival of Certain Provisions. Wherever appropriate to the intention of the
Parties, the respective rights and obligations of the Parties hereunder,
including without limitation all compensation and indemnification obligations,
shall survive any termination or expiration of this Agreement or employment.

 

33.                          Waiver of Breach. No waiver by either Party hereto of a breach of
any provision of this Agreement by any other Party, or of compliance with any
condition or provision of this Agreement to be performed by such other Party,
will operate or be construed as a waiver of any subsequent breach by such other
Party or any similar or dissimilar provision or condition at the same or any
subsequent time. The failure of either Party hereto to take any action by
reason of any breach will not deprive such Party of the right to take action at
any time while such breach continues.

 

34.                          Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Company and its Affiliates (and its and their successors),
as well as upon any person or entity acquiring, whether by merger,
consolidation, purchase of assets, dissolution or otherwise, all or
substantially all of the equity units, business and/or assets of the Company
(or its successor) regardless of whether the Company is the surviving or
resulting corporation. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation, dissolution or otherwise) to
all or substantially all of the equity units, business or assets of the Company
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had occurred; provided, however, no such assumption shall relieve
the Company of any of its duties or obligations hereunder unless otherwise
agreed, in writing, by Executive. This Agreement shall inure to the benefit of
and be enforceable by Executive’s personal or legal representative, executors,
administrators, successors, and heirs. In the event of the death of Executive
while any amount is payable hereunder, all such amounts shall be paid to the
Designated Beneficiary (as defined in Section 6(f)).

 

	
   

  	
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17

 

35.                          Notice. Each notice or other communication required or
permitted under this Agreement shall be in writing and transmitted, delivered,
or sent by personal delivery, prepaid courier or messenger service (whether
overnight or same-day), or prepaid certified United States mail (with return
receipt requested), addressed (in any case) to the other Party at the address
for that Party set forth below that Party’s signature on this Agreement, or at
such other address as the recipient has designated by Notice to the other
Party. Each notice or communication so transmitted, delivered, or sent (a) in
person, by courier or messenger service, or by certified United States mail
shall be deemed given, received, and effective on the date delivered to or
refused by the intended recipient (with the return receipt, or the equivalent
record of the courier or messenger, being deemed conclusive evidence of
delivery or refusal), or (b) by telecopy or facsimile shall be deemed
given, received, and effective on the date of actual receipt (with the
confirmation of transmission being deemed conclusive evidence of receipt,
except where the intended recipient has promptly notified the other Party that
the transmission is illegible). Nevertheless, if the date of delivery or
transmission is not a business day, or if the delivery or transmission is after
5:00 p.m. on a business day, the notice or other communication shall be
deemed given, received, and effective on the next business day.

 

36.                          Executive Acknowledgment. Executive acknowledges (a) being
knowledgeable and sophisticated as to business matters, including the subject
matter of this Agreement, (b) having read this Agreement and understands
its terms and conditions, (c) having been given an ample opportunity to
discuss this Agreement with Executive’s personal legal counsel prior to
execution and being advised by the Company to do so, and (d) no strict rules of
construction shall apply for or against the drafter or any other Party.
Executive hereby represents that Executive is free to enter into this Agreement
including, without limitation, that Executive is not subject to any covenant
not to compete that would conflict with any of his duties under this Agreement.

 

37.                          Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a copy hereof containing multiple
signature pages, each signed by one party hereto, but together signed by both
parties.

 

38.                          Section 409A. This
Agreement is intended to comply with Section 409A of the Internal Revenue Code,
to the extent applicable. 
Notwithstanding any provisions herein to the contrary, this Agreement
shall be interpreted, operated, and administered consistent with this intent. Notwithstanding
any provision to the contrary in the Agreement, payment of any termination
benefits under this Agreement
that are deemed deferred compensation subject to Section 409A of the Code will be made when
Executive’s termination of employment constitutes a “separation from service”
within the meaning of Treas. Reg. Section 1.409A-1(h).  For purposes of determining whether a “separation
from service” within the meaning of Treas. Reg. Section 1.409A-1(h) has
occurred with respect to deferred compensation under the Agreement, in applying
Sections 1563(a)(1), (2) and (3) of the Code for purposes of
determining a controlled group of corporations under Section 414(b) of
the Code, “80 percent” shall be used instead of “at least 80 percent” at each
place the latter appears in Sections 1563(a)(1), (2) and (3) of the
Code; and, in applying Treas. Reg. Section 1.414(c)-2 for purposes of determining trades
or businesses (whether or not incorporated) that are under common control for
purposes of Section 414(c) of the Code, “80 percent” shall be 

 

	
   

  	
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18

 

used instead of “at least 80 percent” at each place the latter appears
in Treas. Reg. Section 1.414(c)-2.  Notwithstanding any provision to the contrary
in the Agreement, if Executive is deemed at the time of his separation from
service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of
the Code, to the extent delayed commencement of any portion of the termination
benefits to which Executive is entitled pursuant to this Agreement is required in order to avoid a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s termination
benefits shall not be provided to him prior to the earlier of (i) the
expiration of the six-month period measured from the date of his “separation
from service” with the Company (as such term is defined in the Treasury
Regulations issued under Section 409A
of the Code) or (ii) the date of Executive’s death. Upon the expiration of
the applicable Code Section 409A(a)(2)(B)(i) deferral period, all payments deferred pursuant to this
Section 38 shall be paid in a lump sum to Executive, and any
remaining payments due under the Agreement shall be paid as otherwise provided
herein.

 

39.                          Indemnity.

 

(a)                            To the greatest extent permitted by law, Company
and its Affiliates shall defend, hold harmless and indemnify Executive from and
against any and all claims, losses, actions, lawsuits, damages, judgments
and/or costs arising out of or in any manner related to Executive’s
relationship with Company and its Affiliates, including but not limited to
claims sounding in breach of contract, tort, breach of any international
treaty, federal or state statute and whether alleging death, personal injury,
property damage, economic damages, non-economic damages or equitable relief, or
any combination thereof. This indemnity provision
is expressly intended to apply to any and all claims, losses, actions,
lawsuits, damages, judgments and/or costs, whether brought by or resulting from
the actions or omissions of the Company, Executive, or any third party,
including but not limited to, those alleging misconduct, negligence, and/or
gross negligence of Executive, whether or not such negligence and/or gross
negligence was (i) the sole proximate cause of the alleged injury or (ii) a
proximate cause jointly and concurrently with the Company or its Affiliates,
and Company and its Affiliates expressly acknowledge their intent and agreement
to be so bound; provided, however such indemnity shall not be applicable if a
court of competent jurisdiction, should determine that an act or omission by
Executive constituting gross negligence or intentional misconduct was the sole
cause of the event resulting in the indemnification claim hereunder.  Notwithstanding the above, no reimbursement
shall be made for attorneys’ fees and expenses incurred by Executive unless the
related claim commences within the applicable statute of limitations period,
and no such reimbursement shall be made later than the last day of the calendar
year following the calendar year in which such expense is incurred. This Section 39
shall be in addition to, and not in limitation of, any indemnity or other
rights of the Executive from the Company or any other person or entity, either
under law, contract or otherwise.

 

[Signature page follows.]

 

	
   

  	
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19

 

IN WITNESS WHEREOF, Executive has executed,
and Company has caused this Agreement to be executed in its name and on its
behalf by its duly authorized officer, to be effective as of the Effective
Date.

 

 

	
  WITNESS:

  	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
  /s/ Virginia Wise

  	
   

  	
  Signature:

  	
  /s/ Thomas B. Pickens, III

  
	
   

  	
   

  	
   

  	
  Thomas B. Pickens, III

  
	
   

  	
   

  	
   

  
	
  Name: 

  	
    Virginia Wise

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: November 20, 2008

  	
   

  	
  Date: November 20, 2008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address for
  Notices:

  
	
   

  	
   

  	
   

  	
  2901 Scenic Drive

  
	
   

  	
   

  	
   

  	
  Austin, TX 78703

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SPACEHAB, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Brian K. Harrington

  	
   

  	
  By:

  	
  /s/ Mark E. Adams

  
	
   

  	
  Name:
  Brian K. Harrington

  	
   

  	
   

  	
  Mark E.
  Adams

  
	
   

  	
  Title:
  Secretary

  	
   

  	
   

  	
  Chairman,
  Compensation Committee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date: November 20, 2008

  	
  Date: November 20, 2008

  
	
   

  	
   

  
	
   

  	
  Address for
  Notices:

  
	
   

  	
  907 Gemini Avenue

  
	
   

  	
  Houston, Texas 77058 

  
	
   

  	
  Attention: Secretary

  
										

 

[Execution Page to Employment Agreement]

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