Document:

Exhibit
4.1

 

INVESTMENT
TECHNOLOGY GROUP, INC.

 

AMENDED
AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

 

1.                                       Purpose.  The purpose
of this Amended and Restated Employee Stock Purchase Plan (the “Plan”) of
Investment Technology Group, Inc. (the “Company”) is to encourage stock
ownership by employees of the Company and its Subsidiaries (as defined below)
and thereby provide employees with an incentive to contribute to the
profitability and success of the Company, and to provide a benefit that will
assist the Company in competing to attract and retain employees of high
quality.  The Plan, which is intended to
qualify as an “employee stock purchase plan” meeting the requirements of Section 423
of the Code, is for the exclusive benefit of eligible employees of the Company
and its Subsidiaries.

 

2.                                       Definitions. 
For purposes of the Plan, in addition to the terms defined in Section 1,
terms are defined as set forth below:

 

(a)                                  “Account” means the account maintained on
behalf of the Participant by the Custodian for the purpose of investing in
Stock and engaging in other transactions permitted under the Plan.

 

(b)                                 “Administrator” means the person or
persons designated to administer the Plan under Section 3(a).

 

(c)                                  “Board” means the Board of Directors of
the Company.

 

(d)                                 “Code” means the Internal Revenue Code of
1986, as amended from time to time. 
References to any provision of the Code will be deemed to include
successor provisions thereto and regulations thereunder.

 

(e)                                  “Custodian” means Computershare, or such
successor thereto as may be appointed by the Board.

 

(f)                                    “Earnings” means that portion of a
Participant’s compensation which constitutes salary, bonus or overtime pay
under the payroll system of the Company and its Subsidiaries and payable to a
Participant during a given pay period.

 

(g)                                 “Enrollment Date” means the first day of
each Offering Period.

 

(h)                                 “Fair Market Value,” unless
otherwise required by an applicable provision of the Code, as of any date,
means the closing sales price of the Stock as reported on the New York Stock
Exchange on the date as of which the valuation is made.

 

(i)                                     “Offering Period” means the approximately
six-month period beginning on February 1 and ending on the last trading
day of July or beginning August 1 and ending on the last trading day
of January.  The first Offering Period
began on February 1, 1998.

 

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(j)                                     “Participant” means an employee of the
Company or a Subsidiary who is participating in the Plan.

 

(k)                                  “Purchase Date” means the last trading
day of each Offering Period.

 

(l)                                     “Purchase Right” means a Participant’s
option to purchase shares, which is deemed to be outstanding and exercisable
during an Offering Period in accordance with the Plan.  A Purchase Right represents an “option” as
such term is used under Section 423 of the Code.

 

(m)                               “Stock” means the common stock, par value
$.01 per share, of the Company, and such other securities as may be substituted
or resubstituted for Stock under Section 4.

 

(n)                                 “Subsidiary” means any corporation (other
than the Company) in an unbroken chain of corporations beginning with the
Company if each of the corporations (other than the last corporation in the
unbroken chain) owns stock possessing more than 50% of the total combined
voting power of all classes of stock in one of the other corporations in the
chain, including a corporation that becomes a Subsidiary during the term of the
Plan.

 

3.                                       Administration.

 

(a)                                  Administrator. 
The Plan will be administered by an Administrator, which shall be the Board
or such Board committee, officer, or committee of officers and employees to
which the Board may delegate administrative duties and authority (other than
authority to amend the Plan).  The
Administrator will have full authority to adopt, amend, suspend, waive, and
rescind such rules and regulations and appoint such agents as it may deem
necessary or advisable to administer the Plan, to correct any defect or supply
any omission or reconcile any inconsistency in the Plan and to construe and
interpret the Plan and rules and regulations thereunder, to furnish to the
Custodian such information as the Custodian may require, and to make all other
decisions and determinations under the Plan (including determinations relating
to eligibility).  No person acting in
connection with the administration of the Plan will, in that capacity,
participate in deciding any matter relating to his or her participation in the
Plan.

 

(b)                                 The Custodian. 
The Custodian will act as custodian under the Plan, and will perform
such duties as are set forth in the Plan and in any agreement between the
Company and the Custodian.  The Custodian
will establish and maintain, as agent for each Participant, an Account and any
subaccounts as may be necessary or desirable for the administration of the
Plan.

 

(c)                                  Other Administrative Provisions. 
The Company will furnish information to the Custodian from its records
as directed by the Administrator, and such records, including as to a
Participant’s Earnings, will be conclusive on all persons unless determined by
the Administrator to be incorrect.  Each
Participant and other person claiming benefits under the Plan must furnish to
the Company in writing an up-to-date mailing address and any other information
as the Administrator or Custodian may reasonably request.  Any communication, 

 

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statement, or
notice mailed with postage prepaid to any such Participant or other person at
the last mailing address filed with the Company will be deemed sufficiently given
when mailed and will be binding upon the named recipient.  The Plan will be administered on a reasonable
and nondiscriminatory basis, and Plan provisions and rules thereunder will
apply in a uniform manner to all persons similarly situated.  All Participants will have equal rights and
privileges (subject to the terms of the Plan) with respect to Purchase Rights
outstanding during any given Offering Period.

 

4.                                       Stock Subject to Plan. 
Subject to adjustment as hereinafter provided, the total number of shares
of Stock reserved and available for issuance upon exercise of Purchase Rights
or otherwise under the Plan will be 1,198,313. 
Any shares of Stock delivered by the Company under the Plan may consist,
in whole or in part, of authorized and unissued shares or treasury shares.  Shares acquired in the open market through
dividend reinvestment will not count against this limit.  The number and kind of such shares of Stock
subject to the Plan will be proportionately adjusted, as determined by the
Board, in the event of any extraordinary dividend or other distribution,
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event affecting the Stock.

 

5.                                       Enrollment and Contributions.

 

(a)                                  Eligibility. 
An employee of the Company or a Subsidiary may enroll in the Plan for
any Offering Period if such employee is employed at the Enrollment Date and was
continuously so employed during the 15 days preceding the Enrollment Date,
unless:

 

(i)                                     At the time of enrollment, the employee’s
customary employment is 20 hours or less per week or the employee’s customary
employment is for not more than five months in any calendar year, or the
employee cannot legally enter into the obligations of a Participant;

 

(ii)                                  Such person would upon enrollment be
deemed to own, for purposes of Section 423(b)(3) of the Code, an
aggregate of five percent or more of the total combined voting power or value
of all outstanding shares of all classes of the Company or of any parent or
Subsidiary (including in such person’s ownership the maximum number of shares
that he or she could acquire under Section 6(c)); or

 

(iii)                               Such person is disqualified from
participation in such Offering Period under Section 7(b).

 

The Company will notify
an employee of the date as of which he or she is eligible to initially enroll
in the Plan, and will make available to each eligible employee the necessary
enrollment forms.

 

(b)                                 Initial Enrollment. 
An employee who is or who will become eligible on or before a given
Enrollment Date under Section 5(a) may, after receiving current
information about 

 

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the Plan,
initially enroll in the Plan by executing and filing with the Administrator a
properly completed enrollment form, including thereon the employee’s election
as to the rate of payroll contributions for the Offering Period.  To be effective for any Offering Period, such
enrollment form must be filed at least 15 days before the Enrollment Date for
the Offering Period.

 

(c)                                  Reenrollment for Subsequent Offering
Periods.  A Participant whose enrollment in and payroll
contributions under the Plan continue throughout an Offering Period will
automatically be reenrolled in the Plan for the next Offering Period unless (i) the
Participant terminates enrollment before the Enrollment Date for the next
Offering Period in accordance with Section 7(a) or (ii) on such
Enrollment Date he or she is ineligible to participate under Section 5(a) (including
due to disqualification under Section 7(b)).  The rate of payroll contributions for a
Participant who is automatically reenrolled for an Offering Period will be the
same as the rate of payroll contributions in effect at the end of the preceding
Offering Period, unless the Participant files a new enrollment form at least 15
days before the Enrollment Date for the Offering Period designating a different
rate of payroll contributions.

 

(d)                                 Payroll Contributions. 
An enrolled Participant will make contributions under the Plan by means
of payroll deductions from each payroll period which ends during the Offering
Period, at the rate elected by the Participant in his or her enrollment form
filed nearest to, but not later than, 15 days before the Enrollment Date for
the Offering Period.  The rate of payroll
contributions elected by a Participant may not be more than ten percent of the
Participant’s Earnings for each payroll period; provided, however,
that the Board may specify a higher maximum rate, subject to Section 8(c) hereof.  The Administrator may specify, on the
enrollment form, whether payroll contributions shall be a percentage of
Earnings or a fixed dollar amount.  The
foregoing and any election of a Participant notwithstanding, a Participant’s
rate of payroll contributions will be adjusted downward by the Company at any
time or from time to time as necessary to ensure that the limit on the amount
of Stock purchased with respect to an Offering Period set forth in Section 6(c) is
not exceeded.  A Participant may elect to
increase, decrease, or discontinue payroll contributions for future Offering
Periods by filing a new enrollment form at least 15 days before the Enrollment
Date for the Offering Period.  A
Participant may not elect to increase or decrease payroll contributions during
an Offering Period, except that a Participant’s payroll contributions will be
automatically discontinued upon the filing of an election to withdraw payroll
contributions prior to a Purchase Date or the filing of an election to withdraw
or transfer shares if such filing occurs less than one year after the Purchase
Date on which such shares were purchased, as specified in Sections 5(f), 7(a) and
7(b).

 

(e)                                  Holding of Payroll Contributions. 
All payroll contributions by a Participant under the Plan will be
received and held by the Company until the end of the Offering Period, and will
represent unfunded obligations of the Company. 
Such amounts are not required to be segregated and may be used by the
Company for any corporate purpose.

 

(f)                                    Withdrawal of Payroll Contributions;
Refund of Payroll Contributions Upon Termination of Employment. 
A Participant may elect to withdraw all (but not less than all) of his
or her payroll contributions for a given Offering Period by filing a notice of
withdrawal with the Administrator not later than the close of business the
business day prior to the Purchase 

 

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Date for such
Offering Period.  In addition, if the
Participant ceases to be employed by the Company and its Subsidiaries prior to
the Purchase Date, his or her payroll contributions for that Offering Period
shall be refunded.  In either case, the
Company shall promptly pay to the Participant (or his or her estate, in the
event of death) the amount of such payroll contributions.  No further payroll contributions shall be
made by the Participant in that Offering Period.  In addition, in the case of withdrawal the
Participant shall be subject to possible disqualification from participation in
the next Offering Period under Section 7(b).

 

(g)                                 Refund of Unused Payroll Contributions. 
If any of a Participant’s payroll contributions are not applied to the
purchase of shares on the Purchase Date (for example, if the number of shares
purchased is limited under Section 6(c)), the portion of such payroll
contributions not applied to the purchase of shares shall be promptly refunded
to the Participant.

 

(h)                                 No Interest Payable on Payroll
Contributions.  No amounts of interest will be credited or
payable by the Company on payroll contributions pending investment in Stock,
withdrawal, refund upon termination, or refund of any unused portion, or in any
other circumstance under the Plan.

 

6.                                       Purchases of Stock.

 

(a)                                  Purchase Rights.  Enrollment
in the Plan for any Offering Period by a Participant will constitute a grant by
the Company of a Purchase Right to such Participant for such Offering
Period.  Each Purchase Right will be
subject to the terms set forth in this Section 6.

 

(b)                                 Purchase Price.  The purchase price at which each share of
Stock will be purchased under a Purchase Right will equal 85% of the lesser of (i) Fair
Market Value of a share of Stock on the first trading day in the Offering
Period and (ii) Fair Market Value of a share of Stock on the last trading
day in the Offering Period.

 

(c)                                  Number of
Shares Purchased.  The number
of shares of Stock that will be purchased upon exercise of a Participant’s
Purchase Right for an Offering Period will equal the number of shares (including fractional
shares) that can be purchased at the purchase price specified in Section 6(b) with
the aggregate amount of the Participant’s payroll contributions during the
Offering Period; provided, however, that the number of shares of
Stock subject to a Participant’s Purchase Right and purchasable in any Offering
Period will not exceed the lesser of (i) the number derived by dividing
$12,500 by 100% of the Fair Market Value of one share of Stock determined as of
the first trading day in the Offering Period or (ii) the number of shares
such that the Participant’s rights to purchase shares under all employee stock
purchase plans qualifying under Section 423 of the Code of the Company and
any parent or Subsidiary shall accrue at a rate which does not exceed $25,000
of the Fair Market Value of the Stock (determined at the time each such option
is granted) as required under Section 423(b)(8) of the Code.

 

(d)                                 Automatic Exercise and Purchase. 
The Purchase Right will be automatically exercised on the Purchase Date
for the Offering Period.  At or as
promptly as 

 

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practicable after
the Purchase Date for an Offering Period, the aggregate amount of the
Participant’s payroll contributions for the Offering Period will be applied by
the Company to the purchase of shares of Stock, in accordance with the terms of
the Plan.  Thereupon, the Company will
deliver the shares of Stock purchased to the Custodian for deposit into the Participant’s
Account.  Payment for Stock purchased
upon exercise of a Purchase Right will be made only through payroll
contributions in accordance with Section 5; no optional payments will be
permitted.

 

(e)                                  Expiration.  A Participant’s
Purchase Right will expire on the earlier of the Purchase Date for the Offering
Period (if not exercised) or the date on which the Participant’s enrollment in
the Plan terminates.

 

(f)                                    Dividend Reinvestment; Other
Distributions.  Cash dividends on any Stock credited to a
Participant’s Account will be automatically reinvested in additional shares of
Stock; such amounts will not be available in the form of cash to
Participants.  All cash dividends paid on
Stock credited to Participants’ Accounts will be paid over by the Company to
the Custodian at the dividend payment date. 
The Custodian will aggregate all purchases of Stock in connection with
the Plan for a given dividend payment date. 
Purchases of Stock for purposes of dividend reinvestment will be made as
promptly as practicable (but not more than 30 days) after a dividend payment
date.  The Custodian will make such
purchases, as directed by the Administrator, either (i) in transactions on
any securities exchange upon which Stock is traded, otherwise in the
over-the-counter market, or in negotiated transactions, or (ii) directly
from the Company at 100% of the Fair Market Value of a share of Stock on the
dividend payment date.  Any shares of
Stock distributed as a dividend or distribution in respect of shares of Stock
or in connection with a split of the Stock credited to a Participant’s Account
will be credited to such Account.  In the
event of any other non-cash dividend or distribution in respect of Stock
credited to a Participant’s Account, the Custodian will, if reasonably
practicable and at the direction of the Administrator, sell any property
received in such dividend or distribution as promptly as practicable and use
the proceeds to purchase additional shares of Stock in the same manner as cash
paid over to the Custodian for purposes of dividend reinvestment.  Shares of Stock acquired under this Section 6(f) shall
be subject to section 7(a) and 7(b) and, for such purposes, shall be
deemed to be acquired by a Participant at the same time as the Participant
acquired the underlying shares in respect of which the shares were distributed
under this Section 6(f).

 

(e)                                  Voting Rights. 
Each Participant will be entitled to vote the number of shares of Stock
credited to his or her Account (including any fractional shares credited to
such account) on any matter as to which the approval of the Company’s
stockholders is sought.  If a Participant
does not vote or grant a valid proxy with respect to shares credited to his or
her Account, such shares will be voted by the Custodian in accordance with any
stock exchange or other rules governing the Custodian in the voting of
shares held for customer accounts. 
Similar procedures will apply in the case of any consent solicitation of
Company stockholders.

 

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7.                                       Withdrawal or Transfer of Shares,
Disqualification, and Account Distribution Upon Termination.

 

(a)                                  Stock Withdrawals and Transfers. 
A Participant may elect to withdraw shares of Stock from his or her
Account in certificated form or to transfer such shares from his or her Account
to an account of the Participant maintained with a broker-dealer or financial
institution; provided, however, that an election to withdraw or
transfer shares filed less than one year after the Purchase Date on which such
shares were purchased shall be deemed an election to withdraw payroll
contributions under Section 5(f) for the current Offering Period and
shall result in disqualification from participation in the next Offering Period
to the extent provided under Section 7(b). 
If a Participant elects to withdraw shares, one or more certificates for
whole shares shall be issued in the name of, and delivered to, the Participant,
with such Participant receiving cash in lieu of fractional shares based on the
Fair Market Value of a share of Stock on the date of withdrawal.  If shares of Stock are transferred from a
Participant’s Account to a broker-dealer or financial institution that
maintains an account for the Participant, only whole shares shall be
transferred and cash in lieu of any fractional share shall be paid over for the
account of Participant based on the Fair Market Value of a share of Stock on
the date of transfer, unless otherwise determined by the Administrator based on
the Administrator’s determination that such broker-dealer or financial institution
is capable of crediting fractional shares. 
Other provisions of this Plan notwithstanding, if the Participant is
then an employee of the Company or its subsidiaries, transfers will be made
only to a broker-dealer or financial institution through which employees are
then permitted to sell Stock under the Company’s policies governing employee
trading in Company securities. 
Participants may not designate any other person to receive directly
shares of Stock withdrawn or transferred under the Plan, although no
restrictions apply under this Plan to shares that have been withdrawn or
transferred.  A Participant seeking to
withdraw or transfer shares of Stock must give instructions to the Custodian in
such manner and form as may be prescribed by the Administrator and the
Custodian, which instructions will be acted upon as promptly as
practicable.  Withdrawals and transfers
will be subject to any fees imposed in accordance with Section 8(a) hereof.

 

(b)                                 Disqualification. 
If a Participant elects to withdraw payroll contributions at any time
under Section 5(f) or elects to withdraw or transfer shares that were
purchased at a Purchase Date less than one year before the date of filing the
election to withdraw or transfer under Section 7(a) (which is also
deemed to constitute an election to withdraw payroll contributions), the
Participant’s enrollment for the Offering Period in effect at the date of such
withdrawal or transfer shall cease and the Participant shall be disqualified
from participating in the next Offering Period beginning after the filing of
such election to withdraw payroll contributions or withdraw or transfer
shares.  The foregoing notwithstanding,
the Administrator may permit a Participant to reenroll in the next Offering
Period if the Participant demonstrates and the Administrator finds that the
withdrawal of payroll contributions and/or the withdrawal or transfer of shares
was necessary due to an unforeseeable financial emergency or hardship of the
Participant.  For purposes of the Plan, a
Participant shall be deemed to withdraw or transfer shares from his or her
Account in the order in which the shares were acquired (i.e., first in-first
out).

 

(c)                                  Distribution of Account Upon Termination. 
Upon termination of employment of a Participant, the Custodian will
continue to maintain the Participant’s Account until the earlier of such time
as the Participant withdraws or transfers all Stock in the Account or

 

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one year after the
Participant ceases to be employed by the Company and its Subsidiaries.  At the expiration of such one year period,
the assets in Participant’s account shall be withdrawn or transferred as
elected by the Participant or, in the absence of such election, as determined
by the Administrator.  If a Participant
dies while assets remain credited to his or her Account, all amounts payable to
the Participant will be paid to his or her estate as promptly as practicable.

 

8.                                       General.

 

(a)                                  Costs.  Costs and
expenses incurred in the administration of the Plan and maintenance of Accounts
will be paid by the Company, including annual fees of the Custodian and any
brokerage fees and commissions for the purchase of Stock upon reinvestment of
dividends and distributions.  The
foregoing notwithstanding, the Custodian may impose or pass through a
reasonable fee for the withdrawal of Stock in the form of stock certificates
(as permitted under Section 6(f)), and reasonable fees for other services
unrelated to the purchase of Stock under the Plan, to the extent approved in
writing by the Company and communicated to Participants.  In no circumstance shall the Company pay any
brokerage fees and commissions for the sale of Stock acquired under the Plan by
a Participant.

 

(b)                                 Statements to Participants. 
The Custodian will reflect payroll contributions, purchases, dividends
and distributions and reinvestment thereof, withdrawals and transfers of shares
of Stock and other Plan transactions by appropriate adjustments to the
Participant’s Account.  The Custodian
will, not less frequently than semi-annually, provide or cause to be provided a
written statement to the Participant showing the transactions in his or her
Account and the date thereof, the number of shares of Stock purchased, the
aggregate purchase price paid, the purchase price per share, the brokerage fees
and commissions paid (if any), the total shares of Stock held for the
Participant’s Account (computed to at least three decimal places), and other
information.

 

(c)                                  Compliance with Section 423. 
It is the intent of the Company that this Plan comply in all respects
with applicable requirements of Section 423 of the Code and regulations
thereunder.  Accordingly, if any
provision of this Plan does not comply with such requirements, such provision
will be construed or deemed amended to the extent necessary to conform to such
requirements.

 

9.  General Provisions.

 

(a)                                  Compliance With Legal and Other
Requirements.  The Plan, the granting and exercising of
Purchase Rights hereunder, and the other obligations of the Company and the
Custodian under the Plan will be subject to all applicable federal and state
laws, rules, and regulations, and to such approvals by any regulatory or
governmental agency as may be required. 
The Company may, in its discretion, postpone the issuance or delivery of
Stock upon exercise of Purchase Rights until completion of such registration or
qualification of such Stock or other required action under any federal or state
law, rule, or regulation, listing or other required action with respect to any
automated quotation system or stock exchange upon which the Stock or other
Company securities are designated or listed, or compliance with any other
contractual obligation

 

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of the Company, as
the Company may consider appropriate, and may require any Participant to make
such representations and furnish such information as it may consider
appropriate in connection with the issuance or delivery of Stock in compliance
with applicable laws, rules, and regulations, designation or listing
requirements, or other contractual obligations.

 

(b)                                 Limits on Encumbering Rights. 
No right or interest of a Participant under the Plan, including any
Purchase Right, may be pledged, encumbered, or hypothecated to or in favor of
any party, subject to any lien, obligation, or liability of such Participant,
or otherwise assigned, transferred, or disposed of except pursuant to the laws
of descent or distribution, and any right of a Participant under the Plan will
be exercisable during the Participant’s lifetime only by the Participant.

 

(c)                                  No Right to Continued Employment. 
Neither the Plan nor any action taken hereunder, including the grant of
a Purchase Right, will be construed as giving any employee the right to be
retained in the employ of the Company or any of its Subsidiaries, nor will it
interfere in any way with the right of the Company or any of its Subsidiaries
to terminate any employee’s employment at any time.

 

(d)                                 Taxes.  The Company
or any Subsidiary is authorized to withhold from any payment to be made to a
Participant, including any payroll and other payments not related to the Plan,
amounts of withholding and other taxes due in connection with any transaction
under the Plan, and a Participant’s enrollment in the Plan will be deemed to
constitute his or her consent to such withholding.  In addition, Participants are required to
advise the Company of sales and other dispositions of Stock acquired under the
Plan in order to permit the Company to comply with tax laws and to claim any
tax deductions to which the Company may be entitled with respect to the Plan.

 

(e)                                  Changes to the Plan. 
The Board may amend, alter, suspend, discontinue, or terminate the Plan
without the consent of stockholders or Participants, provided, however,  that any such action will be subject to the
approval of the Company’s stockholders within one year after such Board action
if such stockholder approval is required by any federal or state law or
regulation or the rules of any automated quotation system or stock
exchange on which the Stock may then be quoted or listed, or if such
stockholder approval is necessary in order for the Plan to continue to meet the
requirements of Section 423 of the Code, and the Board may otherwise, in
its discretion, determine to submit other such actions to stockholders for
approval.  Upon termination of the Plan,
the Board may elect to terminate all outstanding Purchase Rights at such time
as the Board may designate; if such termination results in termination of any Purchase
Right prior to its exercise, all of a Participant’s payroll contributions not
invested in Stock will be returned to the Participant (without interest) as
promptly as practicable.

 

(f)                                    No Rights to Participate; No Stockholder
Rights.  No Participant or employee will have any
claim to participate in the Plan with respect to Offering Periods that have not
commenced, and the Company will have no obligation to continue the Plan.  No Purchase Right will confer on any
Participant any of the rights of a stockholder of the Company unless and 

 

9

 

until Stock is
duly issued or transferred to the Custodian and credited to the Participant’s
Account.

 

(g)                                 Fractional Shares. 
Unless otherwise determined by the Administrator, purchases of Stock
under the Plan executed by the Custodian may result in the crediting of
fractional shares of Stock to the Participant’s Stock Account.  Such fractional shares will be computed to at
least three decimal places.  Fractional
shares will not, however, be issued by the Company, and certificates
representing fractional shares will not be delivered to Participants under any
circumstances.  If at any time fractional
shares will not be credited to Participants’ Accounts, the Administrator shall
determine whether a Participant’s payroll contributions remaining after the
purchase of the greatest possible number of whole shares on a given Purchase
Date will be refunded or will be retained and applied to purchases in the next
Offering Period.

 

(h)                                 Nonexclusivity of the Plan. 
Neither the adoption of the Plan by the Board nor its submission to the
stockholders of the Company for approval will be construed as creating any
limitations on the power of the Board to adopt such other compensatory arrangements
as it may deem desirable, including, without limitation, the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.

 

(i)                                     Governing Law. 
The Plan and all related documents shall be governed by, and construed
in accordance with, the laws of the State of New York (except to the extent the
Delaware General Corporation Law and provisions of federal law may be
applicable), without reference to principles of conflict of laws.  If any provision hereof shall be held by a
court of competent jurisdiction to be invalid and unenforceable, the remaining
provisions of the Plan shall continue to be fully effective.

 

(k)                                  Effective Date. 
The Plan was originally effective February 1, 1998.  The Plan as amended and restated herein shall
be effective as of the date of the Annual Meeting of the Company’s stockholders
in May 2009, subject to approval by the Company’s stockholders at such
Annual Meeting.

 

10Exhibit 10.1

 

THIS AGREEMENT IS SUBJECT TO
ARBITRATION

 

	
  STATE OF TEXAS

  	
  §

  
	
   

  	
  §

  
	
  COUNTY OF DALLAS

  	
  §

  

 

AMENDED AND RESTATED EMPLOYMENT
AGREEMENT

 

THIS AGREEMENT
is dated December 30, 2008 and is to be effective as of December 31, 2008,
by and between DG FastChannel, Inc., a Delaware corporation (the “Corporation”),
and Omar A. Choucair (the “Employee”).

 

WHEREAS, the
Corporation and the Employee are parties to that certain Amended and Restated
Employment Agreement dated June 22, 2006, as amended, which sets forth the
terms and conditions of the Employee’s employment with the Corporation; and

 

WHEREAS, the
Corporation and the Employee desire to further amend and restate such agreement
on the terms and conditions set forth herein;

 

NOW,
THEREFORE, the parties hereto, in consideration of the mutual covenants and
promises hereinafter contained, do hereby agree as follows:

 

1.                                       Employment.  The Corporation hereby employs Employee in
the capacity of Chief Financial Officer, or in such other position of the same
or greater stature (including Chief Executive Officer or Chief Operating
Officer) as the Corporation may direct or desire, and Employee hereby accepts
the employment, on the terms and conditions hereinafter set forth.

 

2.                                       Title
and Duties.

 

(a)                                  The
Employee’s job title shall be Senior Vice-President and Chief Financial Officer
of the Corporation.  During the
Employment Term the Employee shall have such authority and duties as are usual
and customary for such position, and shall perform such 

 

 

additional services and duties as the Board of Directors may from time
to time designate consistent with such position.

 

(b)                                 The
Employee shall report solely to the Chief Executive Officer.  Certain other senior officers of the
Corporation, designated from time to time by the Chief Executive Officer, may
report, directly or indirectly through other senior officers designated from
time to time by the Chief Executive Officer, to the Employee, and the Employee
shall be responsible for reviewing the performance of such senior officers of
the Corporation.

 

(c)                                  The
Employee shall devote his full business time and best efforts to the business
affairs of the Corporation; however, the Employee may devote reasonable time
and attention to:

 

(i)                                     serving
as a director of, or member of a committee of the directors of, any
not-for-profit organization or engaging in other charitable or community
activities; and

 

(ii)                                  serving
as a director of, or member of a committee of the directors of, the
corporations or organizations for which the Employee presently serves in such
capacity, and such other corporations and organizations that the Board may from
time to time approve in the future; provided, that except as specified above,
the Employee may not accept employment with any other individual or other
entity, or engage in any other venture which is indirectly or directly in
conflict or competition with the then existing business of the Corporation.

 

3.                                       Employment
Term.  The term of Employee’s
employment hereunder shall begin on the date hereof and continue until December 31,
2011, unless earlier terminated as herein provided (the “Employment Term”).

 

2

 

4.                                       Salary
and Other Compensation.  As
compensation for the services to be rendered by the Employee to the Corporation
pursuant to this Agreement, the Employee shall be paid the following
compensation and other benefits:

 

(a)                                  Salary:  Salary shall be payable in equal bimonthly
installments in arrears, or otherwise in accordance with the Corporation’s ordinary
payroll practices.  Employee shall be
entitled to annual salary, as follows:

 

for the period from January 1,
2009 through December 31, 2009      $335,000

 

for the period from January 1,
2010 through December 31, 2010      $345,000

 

for the period from January 1,
2011 through December 31, 2011      $355,000

 

or such higher compensation as may be established by the Corporation
from time to time.

 

(b)                                 Bonus:  The Employee shall be eligible for an annual
bonus in an amount of up to $140,000, with the criteria upon which any bonus
would be awarded to be determined in the sole discretion of the Compensation
Committee (or other applicable committee) of the Board of Directors (the “Compensation
Committee’) based in part on revenue and EBITDA goals.  Any annual bonus that becomes payable
pursuant to this Section 4(b) shall be paid between January 1
and March 15th of the year following the year for which such annual bonus
was earned; provided, however, in no event will the bonus be paid after December 31
of the year following the year for which such annual bonus was earned.

 

(c)                                  Stock
Incentive Plans:  The Employee will be
awarded a stock option to purchase 250,000 shares of the Corporation’s common
stock, under the Corporation’s stock incentive plan, at an exercise price equal
to the fair market value of the Corporation’s common stock on the grant date,
as determined by the Compensation Committee. 
In addition, the Employee may receive additional awards under such stock
incentive plan as the Compensation Committee may determine from time to time,
subject to any limitation as may be provided 
by 

 

3

 

applicable law or regulation or the terms of the stock incentive
plan.  All outstanding stock options held
by or on behalf of the Employee shall become fully vested and exercisable upon
the occurrence of a change in control of the Corporation (as defined in the
applicable stock option agreement or related plan document).

 

(d)                                 Car
Allowance:  The Corporation shall pay to
the Employee a car allowance in an amount equal to $500 per month during the
Employment Term payable pursuant to the Corporation’s customary payroll
practices.

 

(e)                                  Employee
Benefit Plans:  The Employee shall be
eligible to participate, on a basis comparable to other executive officers, in
any profit sharing, retirement, insurance, health or other employee benefit
plan maintained by the Corporation.

 

(f)                                    Reimbursement
of Expenses:  In addition to the
compensation provided for hereof, upon submission of proper vouchers, the Corporation
will pay or reimburse the Employee for all normal and reasonable travel and
entertainment expenses incurred by the Employee during the Employment Term in
connection with the Employee’s responsibilities to the Corporation.

 

5.                                       Life
Insurance.  The Corporation, in its
discretion, may apply for and procure in its own name and for its own benefit,
life insurance on the life of the Employee in any amount or amounts considered
advisable by the Corporation, and the Employee shall submit to any medical or
other examination and execute and deliver any application or other instrument
in writing, reasonably necessary to effectuate such insurance.

 

6.                                       Corporation
Payment of Health Benefit Coverage. 
During the Employment Term, the Corporation shall pay the amount of
premiums or other cost incurred for coverage of the 

 

4

 

Employee and his eligible spouse and dependent family members under the
applicable Corporation health benefits arrangement (consistent with the terms
of such arrangement).

 

7.                                       Vacations
and Leave.  The Employee shall be
entitled to four weeks of vacation per year and such additional leave time as
is customarily granted to the other executive officers of the Corporation.

 

8.                                       Non-Disclosure
of Confidential Information.  The
Employee acknowledges that as a result of his employment with the Corporation,
he will be making use of, acquiring, and/or adding to confidential information
of a special and unique nature and value relating to such matters as the
Corporation’s patents, copyrights, proprietary information, trade secrets,
systems, procedures, manuals, confidential reports, and lists of customers
(which are deemed for all purposes confidential and proprietary), as well as
the nature and type of services rendered by the Corporation, the equipment and
methods used and preferred by the Corporation’s customers, and the fees paid by
them.  As a material inducement to the
Corporation to enter into this Agreement and to pay to Employee the
compensation stated in paragraph 4, Employee covenants and agrees that he shall
not, at any time during or following the term of his employment, directly or
indirectly divulge or disclose for any purpose whatsoever any confidential
information that has been obtained by, or disclosed to, him as a result of his
employment by the Corporation.

 

9.                                       Covenants
Against Competition.  The Employee
acknowledges that the services he is to render are of a special and unusual
character with a unique value to the Corporation, the loss of which cannot
adequately be compensated by damages in action at law.  In view of the unique value to the
Corporation of the services of Employee because of the confidential information
to be obtained by or disclosed to Employee, as hereinabove set forth, and as a
material inducement to the Corporation to enter into this Agreement and to pay
to Employee the 

 

5

 

compensation stated in paragraph 4, Employee covenants and agrees that
during Employee’s employment and for a period of twelve months after he ceases
to be employed by the Corporation for any reason, he will not, except as
otherwise authorized by this Agreement, compete with the Corporation or any
affiliate of the Corporation, solicit the Corporation’s customers or the
customers of an affiliate or directly or indirectly solicit for employment any
of the Corporation’s employees.  For
purposes of this paragraph:

 

(a)                                  the
term “compete” means engaging in the same or any similar business as the
Corporation or any of its affiliates in any manner whatsoever (other than as a
passive investor), including without limitation, as a proprietor, partner,
investor, shareholder, director, officer, employee consultant, independent
contractor, or otherwise, within the United States of America;

 

(b)                                 the
term “affiliate” means any legal entity that directly or indirectly through one
or more intermediaries controls, is controlled by, or is under the common
control with the Corporation; and

 

(c)                                  the
term “customers” means all persons to whom the Corporation or any of its
affiliates has sold any product or service within a period of twelve months
prior to the time Employee ceases to be employed by the Corporation.

 

10.                                 Reasonableness
of Non-Disclosure and Noncompetition Restrictions.

 

(a)                                  The
Employee has carefully read and considered the provisions of paragraphs 8 and
9, and, having done so, agrees that the restrictions set forth in these
paragraphs, including, but not limited to, the time period of restriction and
geographical areas of restriction are fair and reasonable and are reasonably
required for the protection of the interests of the 

 

6

 

Corporation and its parent or subsidiary corporations, officers,
directors, shareholders, and other Employees.

 

(b)                                 In
the event that, notwithstanding the foregoing, any of the provisions of
paragraphs 8 and 9 shall be held to be invalid or unenforceable, the remaining
provisions thereof shall nevertheless continue to be valid and enforceable as
though the invalid or unenforceable parts had not been included therein.  In the event that any provision of paragraphs
8 or 9 relating to the time period and/or the areas of restriction and/or
related aspects shall be declared by a court of competent jurisdiction to
exceed the maximum restrictiveness such court deems reasonable and enforceable,
the time period and/or areas of restriction and/or related aspects deemed
reasonable and enforceable by the court shall become and thereafter be the
maximum restriction in such regard, and the restriction shall remain
enforceable to the fullest extent deemed reasonable by such court.

 

11.                                 Remedies
for Breach of Employee’s Covenants of Non-Disclosure and Noncompetition.  In the event of a breach or threatened breach
of any of the covenants in paragraphs 8 and 9, the Corporation shall have the
right to seek monetary damages for any past breach and equitable relief,
including specific performance by means of an injunction against the Employee
or against the Employee’s partners, agents, representatives, servants,
employers, employees, family members and/or any and all persons acting directly
or indirectly by or with him, to prevent or restrain any such breach.

 

12.                                 Termination.  Employment of the Employee under this Agreement
may be terminated:

 

(a)                                  By
the Employee’s death.

 

(b)                                 By
mutual agreement of the Employee and the Corporation.

 

7

 

(c)                                  By
the Corporation for Cause.  This
Agreement and the Employee’s employment with the Corporation may be terminated
for Cause at any time in accordance with subparagraph (e) of this
section.  For purposes of this Agreement,
Cause shall mean only the following: (i) a conviction of or a plea of
guilty or nolo contendre by the
Employee to a felony or an act of fraud, embezzlement or theft or other
criminal conduct against the Corporation; (ii) habitual neglect of the
Employee’s material duties or failure by the Employee to perform or observe any
substantial lawful obligation of such employment that is not remedied within
thirty (30) days after written notice thereof from the Corporation or its Board
of Directors; or (iii) any material breach by the Employee of this
Agreement.  Should the Employee dispute
whether he was terminated for Cause, then the Corporation and the Employee
shall enter immediately into binding arbitration pursuant to the Commercial
Arbitration Rules of the American Arbitration Association, the cost of
which shall be borne by the non-prevailing party.

 

(d)                                 By
Employee for Good Reason.  This Agreement
and the Employee’s employment with the Corporation may be terminated at any
time, at the election of the Employee, for Good Reason following notice and a
reasonable opportunity to cure, and in accordance with subparagraph (e) of
this section.  As used in this Agreement,
Good Reason shall mean (i) the assignment to the Employee of duties
inconsistent with the title of Chief Financial Officer  of the Corporation or his then current
office, the removal of the Employee from such office or any reduction in the
current scope or degradation of the Employee’s job responsibilities, duties,
functions, status, offices and title or material reduction in support staff; (ii) the
material reduction of the Employee’s then current Salary and perquisites, on an
aggregate basis; (iii) the relocation of the Corporation’s principal
executive offices to a location more than twenty (20) miles from the
Corporation’s then current offices or the transfer of the Employee to a place
other 

 

8

 

than the Corporation’s principal executive offices (excepting
reasonable travel on the Corporation’s business); or (iv) any material
breach by the Corporation of this Agreement.

 

(e)                                  Notice
of Termination.  Any purported termination
by the Employee’s employment, either by the Corporation for Cause or by the
Employee for Good Reason, shall be communicated by a written Notice of
Termination to the other party hereto. 
Such notice shall indicate a specific termination provision in this
Agreement which is relied upon, recite the facts and circumstances claimed to
provide the basis for such termination and specify the Date of
Termination.  If within thirty (30) days
from the date the Notice of Termination is given, the party receiving such
notice notifies the other party that a dispute exists concerning such
termination, the parties shall resolve such dispute by entering immediately
into binding arbitration pursuant to the Commercial Arbitration Rules of
the American Arbitration Association, the cost of which shall be borne by the
non-prevailing party.

 

(f)                                    At
the end of the Employment Term.

 

(g)                                 Change
in Control.  In the event of a Change in
Control and, following such Change in Control, if the Employee is terminated by
the Corporation without Cause, or the Employee elects to terminate his
employment for any reason, prior to the end of the Employment Term.  As used in the Agreement, the term “Change in
Control” shall mean:

 

(i)                                     the
sale, lease or other transfer of all or substantially all of the assets of the
Corporation to any person or group (as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended);

 

(ii)                                  the
adoption by the stockholders of the Corporation of a plan relating to the
liquidation or dissolution of the Corporation;

 

9

 

 

(iii)                               the
merger of consolidation of the Corporation with or into another entity or the
merger of another entity into the Corporation or any subsidiary thereof with
the effect that immediately after such transaction the stockholders of the
Corporation immediately prior to such transaction (or their affiliates) hold
less than fifty percent (50%) of the total voting power of all securities
generally entitled to vote in the election of directors, managers or trustees
of the entity surviving such merger of consolidation;

 

(iv)                              the
acquisition by any person or group of more than fifty percent (50%) of the
voting power of all securities of the Corporation generally entitled to vote in
the election of directors of the Corporation; or

 

(v)                                 that
the majority of the Board is composed of members who (A) have served less
than twelve months and (B) were not approved by a majority of the Board at
the time of their election or appointment.

 

13.                                 Payments
Upon Termination.  Payments to the
Employee upon termination shall be limited to the following:

 

(a)                                  If
the Employee is terminated by the Corporation upon death, for Cause, or at the
end of the Employment Term, the Employee shall be entitled to all arrearages of
salary and expenses as of the Date of Termination but shall not be entitled to
further compensation, subject to paragraph 14.

 

(b)                                 If
the Employee terminates for Good Reason or following a Change in Control
pursuant to Section 12(g) above, or if the Employee is terminated by
the Corporation other than for Cause or any other reason set forth in
subparagraph (a) above during the Employment Term, the Employee shall be
entitled to the greater of (i) all remaining salary, in a lump sum
payment, under this Agreement to the end of the Employment Term, or (ii) salary,
in a 

 

10

 

lump sum payment, from the Date of Termination through second
anniversary of the Date of Termination, which lump sum shall be paid unless
otherwise required by Section 15(b) within 90 days following the Date
of Termination with the exact date of payment determined in the sole discretion
of the Corporation.  Employee shall have
no obligation to seek other employment and any income so earned shall not
reduce the foregoing amounts.

 

14.                                 Severance
Following Expiration of Employment Term. 
Following the end of the Employment Term, upon termination of Employee’s
employment with the Corporation for any reason other than Cause, but upon
ninety days prior written notice if such termination is by the Employee, the
Corporation shall pay to the Employee in a lump sum an amount equal to the
amount of salary the Employee would have earned if he had remained employed by
the Corporation for a period of six months following the Date of Termination at
the rate of salary in effect on the Date of Termination, which lump sum shall
be paid unless otherwise required by Section 15(b) within 90 days
after the Date of Termination, with the exact date of payment determined in the
sole discretion of the Corporation.

 

15.                                 Additional
Termination Provisions.

 

(a)                                  Separation
from Service.  Notwithstanding
anything to the contrary in this Agreement, with respect to any amounts payable
to the Employee under this Agreement in connection with a termination of the
Employee’s employment, in no event shall a termination of employment occur
under this Agreement unless such termination constitutes a Separation from
Service.  For purposes of this Agreement,
a Separation from Service shall mean the Employee’s “separation from service”
with the Corporation as such term is defined in Treasury Regulation Section 1.409A-1(h) and
any successor provision thereto.

 

11

 

(b)                                 Section 409A
Compliance.  Notwithstanding anything
contained in this Agreement to the Contrary, to the maximum extent permitted by
applicable law, amounts payable to the Employee pursuant to Sections 13 or 14
shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation
Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term
Deferrals).  However, to the extent any
such payments are treated as non-qualified deferred compensation subject to Section 409A
of  the Code, then if Employee 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, then to the extent
delayed commencement of any portion of the benefits to which Employee is
entitled under this Agreement is required in order to avoid a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code, such portion
of Employee’s termination benefits shall not be provided to Employee prior to
the earlier of (i) the expiration of the six-month period measured from
the date of the Employee’s Separation from Service or (ii) the date of
Employee’s death.  Upon the earlier of
such dates, all payments deferred pursuant to this Section 15(b) shall
be paid in a lump sum to Employee.  The
determination of whether the Employee is a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation
from Service shall made by the Corporation in accordance with the terms of Section 409A
of the Code and applicable guidance thereunder (including without limitation
Treas. Reg. Section 1.409A-1(i) and any successor provision thereto).

 

(c)                                  Resignation
Upon Termination.  In the event of
termination of this Agreement other than for death, the Employee hereby agrees
to resign from all positions held in the Corporation, including without
limitations any position as a director, officer, agent, trustee or consultant
of the Corporation or any affiliate of the Corporation.  For the purposes of this provision, the term “affiliate”
has the same meaning as in paragraph 9.

 

12

 

16.                                 Waiver.  A party’s failure to insist on compliance or
enforcement of any provision of this Agreement, shall not affect the validity
or enforceability or constitute a waiver of future enforcement of that
provision or of any other provision of this Agreement by that party or any
other party.

 

17.                                 Governing
Law.  This Agreement shall in all
respects be subject to, and governed by, the laws of the State of Texas.

 

18.                                 Severability.  The invalidity or unenforceability of any
provision in the Agreement shall not in any way affect the validity or
enforceability of any other provision and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision had never been in
the Agreement.

 

19.                                 Notice.  Any and all notices required or permitted
herein shall be deemed delivered if delivered personally or if mailed by
registered or certified mail to the Corporation at its principal place of
business and to the Employee at the address hereinafter set forth following the
Employee’s signature, or at such other address or addresses as either party may
hereafter designate in writing to the other.

 

20.                                 Assignment.  This Agreement, together with any amendments
hereto, shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, assigns, heirs and personal
representatives, except that the rights and benefits of either of the parties
under this Agreement may not be assigned without the prior written consent of
the other party.

 

21.                                 Indemnification
and Insurance; Legal Expenses.  The
Corporation shall indemnify the Employee to the fullest extent permitted by the
laws of the State of Delaware, as in effect at the time of the subject act or
omission, and shall advance to the Employee reasonable attorneys’ 

 

13

 

fees and expenses as such fees and expenses are incurred (subject to an
undertaking from the Employee to repay such advances if it shall be finally
determined by a judicial decision which is not subject to further appeal that
the Employee was not entitled to the reimbursement of such fees and expenses)
and he will be entitled to the protection of any insurance policies the
Corporation may elect to maintain generally for the benefit of its directors
and officers (“Directors and Officers Insurance”) against all costs, charges
and expenses incurred or sustained by him in connection with any action, suit
or proceeding to which he may be made a party by reason of his being or having
been a director, officer or employee of the Corporation or any of its
subsidiaries or his serving or having served any other enterprise as a
director, officer or employee at the request of the Corporation (other than any
dispute, claim or controversy arising under or relating to this Agreement).  The Corporation covenants to maintain during
the Employment Term for the benefit of the Employee (in his capacity as an
officer and director of the Corporation) Directors and Officers Insurance
providing benefits to the Employee no less favorable, taken as a whole, than
the benefits provided to the Employee by the Directors and Officers Insurance
maintained by the Corporation on the date hereof; provided, however, that the
Board may elect to terminate Directors and Officers Insurance for all officers
and directors, including the Employee, if the Board determines in good faith
that such insurance is not available or is available only at unreasonable
expense.

 

22.                                 Amendments.  This Agreement may be amended at any time by
mutual consent of the parties hereto, with any such amendment to be invalid
unless in writing, signed by the Corporation and the Employee.

 

23.                                 Entire
Agreement.  This Agreement amends and
restates in its entirety the terms and conditions of Employee’s employment with
the Corporation, notwithstanding the terms and 

 

14

 

conditions of any previous employment agreement between the Corporation
and the Employee.  This Agreement, along
with the Corporation handbook to the extent it does not specifically conflict
with any provision of this Agreement, contains the entire agreement and
understanding by and between the Employee and the Corporation with respect to
the employment of the Employee, and no representations, promises, agreements,
or understandings, written or oral, relating to the employment of the Employee
by the Corporation not contained herein shall be of any force or effect.

 

24.                                 Burden
and Benefit.  This Agreement shall be
binding upon, and shall inure to the benefit of, the Corporation and Employee,
and their respective heirs, personal and legal representatives, successors, and
assigns.

 

25.                                 Headings.  The various headings in this Agreement are
inserted for convenience only and are not part of the Agreement.

 

26.                                 In-kind
Benefits and Reimbursements. 
Notwithstanding any thing to the contrary in this Agreement, in-kind
benefits and reimbursements provided under this Agreement during any tax year
of the Employee shall not affect in-kind benefits or reimbursements to be
provided in any other tax year of the Employee and are not subject to
liquidation or exchange for another benefit. 
Notwithstanding any thing to the contrary in this Agreement,
reimbursement requests must be timely submitted by Employee and, if timely
submitted, reimbursement payments shall be made to the Employee as soon as
administratively practicable following such submission, but in no event later
than the last day of Employee’s taxable year following the taxable year in
which the expense was incurred.  In no
event shall the Employee be entitled to any reimbursement payments after the
last day of Employee’s taxable year following the taxable year in which the 

 

15

 

expense was incurred.  This
paragraph shall only apply to in-kind benefits and reimbursements that would
result in taxable compensation income to the Employee.

 

27.                                 Section 409A;
Separate Payments.  This Agreement is
intended to be written, administered, interpreted and construed in a manner
such that no payment or benefits provided under the Agreement become subject to
(a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or
(b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together,
referred to herein as the “Section 409A Penalties”), including, where
appropriate, the construction of defined terms to have meanings that would not
cause the imposition of Section 409A Penalties.  In no event shall the Corporation be required
to provide a tax gross-up payment to Employee or otherwise reimburse Employee
with respect to Section 409A Penalties. 
For purposes of Section 409A of the Code (including, without
limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)),
each payment that Employee may be eligible to receive under this Agreement
shall be treated as a separate and distinct payment.

 

28.                                 Validity
Contest.  The Corporation shall
promptly pay any and all legal fees and expenses incurred by the Employee from
time to time as a direct result of the Corporation’s contesting the due
execution, authorization, validity or enforceability of this Agreement  Reimbursement of such expenses shall be made
promptly after an expense reimbursement request has been presented to the
Corporation by the Employee and in no event later than the last day of the
Employee’s taxable year following the taxable year in which such expenses were
incurred and the reimbursement of such expenses shall be subject to the
provisions of Section 26.

 

[Remainder of page intentionally blank.]

 

16

 

IN WITNESS
WHEREOF, the Corporation and Employee have duly executed this Agreement to be
effective as of the day and year first above written.

 

 

	
   

  	
  CORPORATION:

  
	
   

  	
   

  
	
   

  	
  DIGITAL GENERATION SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott K. Ginsburg

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Scott K. Ginsburg

  
	
   

  	
   

  
	
   

  	
  Its:

  	
  CEO and Chairman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
  /s/ Omar A. Choucair

  
	
   

  	
  OMAR A. CHOUCAIR

  
					

 

17

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