Document:

ex10-1.htm

Exhibit 10.1

 

MANAGEMENT SERVICES AGREEMENT

 

This management services agreement (the “Agreement”) is dated as of October 1, 2011, and is between SP Corporate Services LLC (“SP Corporate”), a Delaware limited liability company having an office at 590 Madison Avenue, 32nd Floor, New York, New York 10022, and ADPT Corporation, a Delaware corporation (the “Company”) having an office at 691 South Milpitas Boulevard, Suite 208, Milpitas, California 95035.

 

RECITALS

 

WHEREAS, the Company desires to have SP Corporate furnish certain services to the Company and its subsidiaries, as described in Section 1.01 (the “Primary Services”) and Section 1.02 (the “Additional Services” and, together with the Primary Services, the “Services”), and SP Corporate has agreed to furnish Services pursuant to the terms and conditions set forth herein.

 

WHEREAS, the Audit Committee (the “Committee”) of the Board of Directors of the Company (the “Board”) approved this Agreement and recommended the Board’s approval, and a majority of the disinterested directors of the Company has voted to approve this Agreement.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

 

Section 1.               Engagement of SP Corporate

 

1.01.                Primary Services.

 

	
  

	
(a)

	
During the term of this Agreement, SP Corporate shall provide to the Company the non-exclusive services of a person designated by SP Corporate and approved by the Committee to perform the services of Chief Financial Officer of the Company in accordance with the terms and provisions of this Agreement (the “CFO Designee”).  In his or her capacity as the Chief Financial Officer of the Company, the CFO Designee shall report to the Committee and the Chief Executive Officer of the Company.  The CFO Designee shall devote such time and effort as is reasonably necessary to fulfill the statutory and fiduciary duties of the Chief Financial Officer of the Company until such time as otherwise instructed or
removed by the Board or the resignation of the CFO Designee in such capacity or his or her death.  In the event the CFO Designee ceases for any reason to serve as Chief Financial Officer, SP Corporate has a right, but not an obligation, to propose another person to serve as the Company’s Chief Financial Officer.  If such person is approved by the Committee, then this Agreement shall be amended accordingly.  The duties of the CFO Designee are set forth in additional detail on Exhibit A.  This Agreement shall apply in all material respects to any successor to the CFO Designee who serves as the Chief Financial Officer of the Company in accordance with this Agreement and the term the CFO Designee used herein shall apply to any such successor.

 

  

  

  

	
  

	
(b)

	
During the term of this Agreement, SP Corporate shall provide to the Company the non-exclusive services of such person as designated by the CFO Designee and approved by the Committee, which approval shall not be unreasonably withheld, from time to time (the “Reporting Manager Designee” and, together with the CFO Designee, the “Designated Officers”) to serve as the Financial Reporting Manager (the “Reporting Manager”) of the Company; provided that the CFO Designee, in his or her evaluation of whether a candidate for the Reporting Manager’s position is
appropriately qualified, shall apply such criteria as the Committee may from time to time establish.  In his or her capacity as the Reporting Manager of the Company, the Reporting Manager Designee shall report to the Chief Financial Officer.  The Reporting Manager Designee shall devote such time and effort as is reasonably necessary to fulfill the duties assigned to him or her until such time as otherwise instructed or removed by the Board or the resignation of the Reporting Manager Designee in such capacity or his or her death.  In the event the Reporting Manager Designee ceases for any reason to serve as the Reporting Manager, SP Corporate or the CFO Designee shall designate another person to serve as the Company’s Reporting Manager, subject to the Committee’s approval, which approval shall not be unreasonably withheld.  If no such
person is designated or approved, then this Agreement shall be amended accordingly.  The duties of the Reporting Manager Designee are set forth in additional detail on Exhibit A.  This Agreement shall apply in all material respects to any successor to the Reporting Manager Designee who serves as the Reporting Manager of the Company in accordance with this Agreement and the term the Reporting Manager Designee used herein shall apply to any such successor.

 

1.02.                 Additional Services.  During the term of this Agreement, the Company and its subsidiaries may obtain from SP Corporate, and if the Company so elects SP Corporate shall provide, additional accounting, finance, human resources, operational and other services (the “Additional Services”), the scope and details of which, including hourly rates for such Additional Services, shall be determined by reference to current competitive market rates and
agreed upon by the Company (with the approval of the Committee) and SP Corporate from time to time and shall be set forth on an Annex to this Agreement.  The Company’s Chief Executive Officer shall have the authority to cause the Company to obtain Additional Services in accordance with the terms set forth on the applicable Annex, with the aggregate fees not to exceed $25,000 or any other amount that the Committee otherwise directs (the “Authorized Budget”), and subject to the requirements of the Delegation of Authority attached hereto as Exhibit B, as it may be amended from time to time with the consent of the Committee (the “Delegation of Authority”), and
such other procedures as may be adopted from time to time by the Committee.  Each time the actual aggregate fees for Additional Services exceed the Authorized Budget or the Chief Executive Officer expects that potential fees together with the actual fees in the aggregate will exceed the Authorized Budget, the Chief Executive Officer shall report to the Committee and present such financial and accounting statements documenting the actual and potential expenses as the Committee may require, and the Committee may approve a new Authorized Budget for the Chief Executive Officer to obtain more Additional Services; provided, however, that the Committee may amend or modify the foregoing process from time to time.  The parties may agree at any time to produce a new Annex or amend any existing Annex to this Agreement to provide for further Additional Services, the elimination
of certain Additional Services, increases or decreases to the compensation paid hereunder, or other changes, upon the mutual agreement of the parties hereto and, in the case of the Company, with the approval of the Committee.

 

  

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1.03.                 In performing Services, SP Corporate and its personnel shall be subject to the oversight of the Committee and shall report to the Committee at least monthly and otherwise in accordance with such procedures as may be adopted by the Committee from time to time.  SP Corporate, the CFO Designee, the Reporting Manager Designee, any of SP Corporate’s Agents (as defined below) or any of its personnel may incur an obligation or enter into any transaction on behalf of the Company only (a) with the prior approval of the
Committee or (b) in accordance with the Delegation of Authority and consistent with the Company’s business and investment objectives, strategy, guidelines, policies and limitations as approved by the Board from time to time.  In addition, the prior approval of the Committee will be required for each expense reimbursement payable to SP Corporate pursuant to Section 3.02, and each transaction to which SP Corporate or any of its Affiliated Companies (as defined below) is a party.

 

1.04.                 While the amount of time and personnel required for performance by SP Corporate hereunder will necessarily vary depending upon the nature and type of Services, SP Corporate shall devote such time and effort and make available such personnel as may from time to time reasonably be required for the performance of Services hereunder and shall use its reasonable best efforts to carry out the purposes of the Company and shall perform Services to the best of its abilities in a timely, competent and professional manner, in compliance
with any laws relevant to such Services, in compliance with the Delegation of Authority, in compliance with the Company’s policies, procedures and controls provided by the Company to SP Corporate in writing from time to time and in compliance with such reasonable directions as SP Corporate’s officers, employees or representatives may receive from the Committee or from the Company’s officers or other designated representatives from time to time.

 

1.05.                 In the performance of Services, SP Corporate will (i) assist and support the Company’s compliance with the requirements of the Securities Exchange Act of 1934, as amended, Securities Act of 1933, as amended, the Sarbanes Oxley Act of 2002 (the “SOA”) and the rules and regulations of the Securities and Exchange Commission promulgated thereunder (including Section 404 of the SOA related to internal controls and Sections 302 and 906 of the SOA
related to certifications) and any other applicable Federal or state securities law, and act in a manner consistent with regards thereto, and (ii) not cause the Company to violate, any statue or regulation or any order, writ, judgment, or decree of any court, arbitrator or governmental authority applicable to the Company and its subsidiaries and affiliates.

 

Section 2.                Term and Termination

 

2.01.                This Agreement shall commence effective as of October 1, 2011, and shall continue through September 30, 2012, and shall automatically renew for successive one (1) year periods unless and until terminated as provided in Section 2.02 below.

 

  

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2.02.                 This Agreement may be terminated (i) by either party, effective on any anniversary date, upon not less than ninety (90) days prior written notice to the other (provided, however, that at the election of the Company any such termination by SP Corporate shall not take effect until the earlier of the date the Company has selected a substitute chief financial officer to take over the responsibilities of the CFO Designee and 120 days from such termination); (ii) by the Company, at any time, on less than ninety (90) days notice;
provided that, if the Company provides less than ninety (90) days notice, it shall pay to SP Corporate a termination fee equal to 125% of the fees due under this Agreement, as calculated under Section 3, from, and including, such termination date until, and including, the 90th day following the date of such notice; (iii) at the election of the Committee, immediately upon death of the CFO Designee, his or her resignation as Chief Financial Officer, removal as Chief Financial Officer by SP Corporate or removal as Chief Financial Officer for Cause by the Company, unless SP Corporate has proposed, and the Committee has approved and appointed a successor Chief Financial Officer, and this Agreement has been amended accordingly; (iv) immediately upon the bankruptcy or dissolution of SP Corporate, or (v) immediately by the Company for Cause or upon a material breach of this Agreement (as
reasonably determined by the Committee) by SP Corporate or the CFO Designee.

 

For the purposes of this Agreement, “Cause” shall mean, with respect to the termination of this Agreement, fraud, gross negligence, criminal conduct or willful misconduct by SP Corporate or the CFO Designee, as applicable, or breach of fiduciary duty by the CFO Designee, in connection with performing its or his or her respective duties hereunder, as reasonably determined by the Committee.

 

2.03.                 In the event this Agreement is terminated pursuant to Section 2.02 above, SP Corporate shall cease to perform Services.  If the termination of this Agreement takes effect on a day other than the end of a calendar month, monthly fees shall be prorated based on the number of days that SP Corporate performed Services during such calendar month until termination.

 

Section 3.                 Payments to SP Corporate

 

3.01.                 In consideration of Services furnished by SP Corporate hereunder, the Company shall pay to SP Corporate (a) a fixed monthly fee in the amount and manner as set forth in Exhibit A hereto, which shall be adjustable annually upon mutual agreement by the parties, for Primary Services, and (b)the amounts specified on one or more Annexes to this Agreement as provided in Section 1.02, for Additional Services.

 

3.02.                 The Company shall reimburse SP Corporate and the Designated Officers for all reasonable and necessary business expenses incurred on behalf of the Company in connection with the performance of Services, subject to (a) the review and approval of the Committee, (b) the Delegation of Authority and (c) such other policies and procedures as the Company may have in place from time to time, provided that the Chief Executive Officer of the Company shall have the ability to review and approve any reasonable and necessary travel
expenses of the Designated Officers in connection with the performance of Services in accordance with the Company’s policies and procedures.  Expenses incurred by SP Corporate on behalf of the Company and reimbursable pursuant to this Section 3.02 shall be reimbursed by the Company no less than monthly.  SP Corporate shall prepare a statement documenting such expenses during each month, and the Company shall reimburse SP Corporate for such expenses within forty-five (45) days after receipt and approval of such statement and such supporting material as the Committee may require.

 

  

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Section 4.                Representations and Warranties of SP Corporate and the Designated Officers

 

4.01.               SP Corporate hereby makes the following representations and warranties on which the Company has relied in making the delegation set forth in this Agreement:

 

	
  

	
(a)

	
SP is a Delaware limited liability company, duly organized, validly existing and in a good standing under the laws of the State of Delaware and is duly qualified as a foreign company in each jurisdiction in which the nature of its business makes such qualification necessary.

 

	
  

	
(b)

	
SP Corporate has all requisite power and SP Corporate has authority to execute, deliver and perform this Agreement, and the execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of SP Corporate.

 

	
  

	
(c)

	
This Agreement constitutes a legal, valid and binding obligation of SP Corporate, enforceable against it in accordance with its terms.

 

	
  

	
(d)

	
The execution, delivery and performance by SP Corporate or the Designated Officers of this Agreement does not (i) violate any provision of the operating agreement of SP Corporate (the “SP Corporate’s Organizational Documents”), (ii) violate any statue or regulation or any order, writ, judgment, or decree of any court, arbitrator or governmental authority applicable to SP Corporate or any of its assets or the Designated Officers, or (iii) violate or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of any lien on the assets of SP Corporate pursuant to the provisions of, any mortgage, indenture, contract, agreement or other undertaking to which SP
Corporate is a party.

 

	
  

	
(e)

	
To the knowledge of SP Corporate, there are no past or present actions, occurrences, conditions or circumstances that could reasonably be expected to adversely affect the Company’s ability to comply with the requirements of applicable Federal and state securities laws or its control environment, in each case by reason of the entry by the Company into this Agreement or the provision of Services by SP Corporate.

 

Section 5.                Agents

 

5.01.               SP Corporate may delegate any or all of the powers, rights and obligations under this Agreement and may appoint, employ, contract or otherwise deal with any person or entity (each, an “Agent”) in respect of the performance of Additional Services upon prior approval of any such delegation by the Committee.  SP Corporate may assign to any such Agent approved by the Committee the right to receive any fee or reimbursement of expenses as SP Corporate would
be entitled to received under this Agreement.  SP Corporate shall disclose to the Committee upon its request the terms of any such sub-contracting arrangement entered into by and between SP Corporate and any Agent.

 

  

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5.02.                 SP Corporate shall supervise the activities of its Agents, and notwithstanding the designation of or delegation to any Agent, SP Corporate shall remain obligated to the Company for the proper performance of Services; provided, however, that SP Corporate and the Company may enter into any agreement for indemnification pursuant to which an Agent may indemnify and hold harmless SP Corporate and the Company, jointly and severally, from any liability to them arising by reason of the act or omission of such
Agent.  Nothing contained herein shall affect or otherwise limit the indemnification obligations of SP Corporate to the Company as provided in Section 9.01.

 

Section 6.                 Records; Access

 

6.01.                 SP Corporate shall maintain appropriate records of all its activities hereunder and make such records available for inspection upon request by the Committee and by counsel, auditors and authorized agents of the Company, at any time or from time to time during normal business hours, provided that SP Corporate shall have a reasonable time to review any such records prior to making them available for inspection and to delete or redact from such records any information not specifically relating to the provision of Services to the
Company by SP Corporate.

 

6.02.                 SP Corporate and its officers, employees and representatives, including the Designated Officers, in performance of Services, shall have access to all accounting books, ledgers, receipts, business information, employee information, research, organizational structure information, data, computer programs and budget figures of the Company and its subsidiaries and any other information of the Company and its subsidiaries related to the performance of Services by SP Corporate, its officers, employees, and representatives, including
the Designated Officers, whether or not considered material (the “Information”), and the Company shall promptly make any such Information available to SP Corporate upon its reasonable request.  Such Information shall (a) unless otherwise approved by the Committee, at all times remain on the Company’s (or its designated third party service providers’)  information technology systems and not be transferred to SP  Corporate; (b) in all circumstances, be maintained in accordance with the Company’s internal controls systems and in a manner that will not result in any material weaknesses or combination of deficiencies that would cause material weaknesses in the Company's financial or other controls and (c) remain confidential as provided in Section 11.  The Company confirms that the Committee has approved the maintenance of
the Information, including accounting systems, for Newco Sports, Inc., (a subsidiary of the Company) and its subsidiaries on the accounting platform of SP Corporate or a designee of SP Corporate (which designee shall be approved by the Committee prior to such delegation), provided that such Information shall (1) at all times be physically and electronically segregated from the Information of SP Corporate and its other clients, and (2) be maintained in a manner that will not result in any material weaknesses or combination of deficiencies that would cause material weaknesses in the Company’s financial or other controls.

 

  

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6.03.                SP Corporate covenants that during the term of this Agreement it will notify the Company of any change in SP Corporate’s business, financial condition, results of operations or status that would reasonably be expected to have a material effect on the provision of Services under this Agreement.

 

6.04.                In the event the Agreement is terminated, SP Corporate will transfer any and all physical and electronic records of the Company in a reasonable format specified by the Company.

 

Section 7.                Limitation on Activities

 

Notwithstanding any provision of this Agreement, SP Corporate and its personnel shall not take any action which, in their sole judgment made in good faith, would violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company and its subsidiaries and affiliates, or otherwise not permitted by the Company’s Certificate of Incorporation or By-laws, as each may be amended from time to time (the “Company’s Charter Documents”), or policies and procedures, except if such action shall be ordered in writing by the Committee following the affirmative vote
of a majority of the members of the Committee present at a properly called meeting of the Committee, in which case SP Corporate or its personnel shall have no liability for acting in accordance with the specific instructions of the Company so given.  Notwithstanding the foregoing, the officers, directors, members, employees, affiliates, consultants or agents of SP Corporate (the “SP Corporate Persons”) (except the CFO Designee in his or her capacity as the Chief Financial Officer of the Company and the Reporting Manager Designee in his or her capacity as the Reporting Manager of the Company) shall not be liable to the Company or holders of its securities for any act or omission by SP Corporate, the CFO Designee or the Reporting Manager Designee, as applicable, taken or omitted to be taken in the performance of Services under this Agreement except as provided in
Section 9 of this Agreement.

 

Section 8.                Limitation on Liability

 

SP Corporate shall reasonably rely on information provided to it about the Company, if any, that is provided by the Company or the Company’s subsidiaries, employees, agents or representatives.  In no event shall SP Corporate be liable for any error or inaccuracy of any report, computation or other information or document produced in accordance with this Agreement, for whose accuracy the Company assumes all responsibility, unless resulting from the fraud, gross negligence, willful misconduct or reckless disregard of duties of SP Corporate or the SP Corporate Persons. Notwithstanding any provision herein to the contrary, except with respect to fraud, gross negligence, willful
misconduct or reckless disregard of duties by SP Corporate, the CFO Designee or the Reporting Manager Designee or other SP Corporate Persons, SP Corporate’s aggregate liability with respect to, arising from, or arising in connection with this Agreement, or from all Services provided or omitted to be provided under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed the amounts paid hereunder by the Company to SP Corporate as fees and charges for the trailing twelve months from the date of any claim, but not including reimbursable expenses.

 

  

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Section 9.                 Indemnity and D&O Insurance

 

9.01.                 To the fullest extent permitted by law, SP Corporate shall defend, indemnify, save and hold harmless the Company from and against any claims, liabilities, damages, losses, costs or expenses, including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and reasonable expenses of investigating or defending against any claim or alleged claim of any nature whatsoever resulting from SP Corporate’s, the CFO Designee’s, the Reporting Manager
Designee’s or the SP Corporate Persons’ activities or services under this Agreement (a “Claim”) and incurred by reason of SP Corporate’s, the CFO Designee’s, the Reporting Manager Designee’s or the SP Corporate Persons’, as applicable, fraud, willful misconduct, gross negligence or reckless disregard of their respective duties; provided, however, that SP Corporate, the CFO Designee or the Reporting Manager Designee shall not be held responsible for (i) any action of the Company in which SP Corporate, the CFO Designee or the Reporting Manager Designee, as applicable, advised the Board or the Committee prior to taking such action and the Board (including a majority of the disinterested directors) or the Committee declined to follow such advice and such decision was provided in writing to SP Corporate or (ii) any Claim to the extent such
Claim is occasioned by the fraud, gross negligence or willful misconduct of duties of the Company’s officers, directors, employees, consultants or agents (except for the Designated Officers, SP Corporate or the SP Corporate Persons).

 

9.02.                 To the fullest extent permitted by law, the Company shall defend, indemnify, save and hold harmless SP Corporate and the SP Corporate Persons (except for the Designated Officers) from and against any Claim, including any negligent errors or omissions, other than any Claim by the Company, and except to the extent any such Claim is occasioned by the fraud, gross negligence, willful misconduct or reckless disregard of duties of SP Corporate, the CFO Designee, the Reporting Manager Designee or the SP Corporate
Persons.

 

9.03.                 The Company shall enter into indemnification agreements with the Designated Officers consistent with agreements entered into with other executive officers.

 

9.04.                 Promptly after receipt by SP Corporate or the Company of notice of any Claim, it (the “Indemnified Party”) shall notify the other (the “Indemnifying Party”) in writing; provided, however, that the failure of the Indemnified Party to give timely notice hereunder shall not affect the rights of the Indemnified Party to indemnification hereunder, except to the extent that the
Indemnifying Party can demonstrate actual, material prejudice to it as a result of such failure.  The Indemnified Party shall reasonably cooperate with appropriate requests of the Indemnifying Party with regard to the defense of any Claim.  The Indemnifying Party shall maintain authority and control of the defense of any such Claim and the authority to settle or otherwise dispose of any such Claim (provided that the Indemnified Party shall have the right to reasonably participate at its own expense in the defense or settlement of any such Claim).  In no event, however, may the Indemnifying Party agree to any settlement of any Claim that would affect any of the Indemnified Party’s rights or obligations, or that would constitute an admission of guilt or liability on the part of the Indemnified Party, without the Indemnified Party’s express prior
written consent.

 

  

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9.05.               If SP Corporate should reasonably determine its interests are or may be adverse to the interests of the Company, SP Corporate may retain its own counsel in connection with such claim or alleged claim or action, in which case the Company shall be liable, to the extent permitted under this Section 9, to SP Corporate for any reasonable and documented legal, accounting or other directly related fees and expenses incurred by SP Corporate in connection with its investigating or defending such claim or alleged claim or action.

 

9.06.               At all times during which (a) the CFO Designee is acting as non-employee Chief Financial Officer of the Company, the Company shall cause him or her, and (b) the Reporting Manager Designee is acting as non-employee Reporting Manager of the Company, the Company shall cause him or her, to be covered by the Company’s D&O insurance policy applicable to other officers and directors.

 

9.07.               Neither SP Corporate nor the Company (including their officers, directors, members, employees, affiliates and consultants and the Designated Officers) shall be liable to the other or any third party for any special, consequential or exemplary damages (including lost or anticipated revenues or profits relating to the same) arising from any claim relating to this Agreement or any of the services provided hereunder, whether such claim is based on warranty, contract, tort (including negligence or strict liability) or otherwise, even if an
authorized representative of SP Corporate or the Company, as applicable, is advised of the possibility or likelihood of the same.

 

Section 10.             Payments and Duties of SP Corporate Upon Termination

 

10.01.             SP Corporate shall promptly upon termination:

 

	
  

	
(a)

	

pay to the Company any money collected and held for the account of the Company pursuant to this Agreement, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled under Section 3;

 

	
  

	
(b)

	
deliver to the Board all assets, books and records and documents of the Company then in the custody of SP Corporate; and

 

	
  

	
(c)

	
cooperate with the Company to provide an orderly management transition and the Company shall pay SP Corporate reasonable fees and expenses in connection therewith.

 

Section 11.             Confidential Information; Non-Solicitation

 

11.01.             Except as provided in Sections 11.02 and 11.03 below, neither SP Corporate nor the Designated Officers shall at any time during or following the termination or expiration for any reason of this Agreement, directly or indirectly, disclose, publish or divulge to any person (except where necessary in connection with the furnishing of Services under this Agreement), appropriate or use, or cause or permit any other person to appropriate or use, any of the Company’s inventions, discoveries, improvements, trade secrets, copyrights or other
proprietary, secret or confidential information not then publicly available (the “Confidential Information”).

 

  

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11.02.               Notwithstanding the provisions of Section 11.01 above, SP Corporate or the Designated Officers may disclose Confidential Information to SP Corporate’s representatives who (i) need to know such information to permit SP Corporate and the Designated Officers to provide Services in accordance with the terms of this Agreement, (ii) are informed of the confidential nature of the Confidential Information and (iii) agree to maintain the confidentiality of the Confidential Information.  SP Corporate shall be fully responsible for
any breach of the provisions of this Section 11 by any of its representatives.

 

11.03.               Notwithstanding the provisions of Section 11.01 above, if SP Corporate, the Designated Officers or any of SP Corporate’s representatives are required to disclose any Confidential Information pursuant to applicable laws or regulations or by any subpoena or similar legal process, SP Corporate shall promptly notify the Company in writing of any such requirement, if legally permissible, so that the Company may seek an appropriate protective order or other appropriate remedy or waive compliance with the provisions of this
Agreement.  SP Corporate shall, and shall direct its representatives (including the Designated Officers) to, reasonably cooperate with the Company to obtain such a protective order or other remedy and if such order or other remedy is not obtained, or the Company waives compliance with the provisions of this Agreement, SP Corporate, the Designated Officers or SP Corporate’s representatives shall disclose only that portion of the Confidential Information which they are advised by counsel that they are legally required to so disclose and will use good faith efforts to obtain reliable assurance that confidential treatment will be accorded the information so disclosed.

 

11.04.               SP Corporate and the Designated Officers acknowledge that (i) they are aware and that SP Corporate’s representatives have been advised that (a) the Confidential Information may include material non-public information about  the Company and its subsidiaries and affiliates, and (b) the United States securities laws and securities law of other jurisdictions prohibit any person who has material non-public information about a company from purchasing or selling securities of such company on the basis of such information or
from otherwise misappropriating such material non-public information in breach of fiduciary duty or other relationship of trust and confidence, (ii) SP Corporate has developed compliance procedures regarding the use of material non-public information and (iii) SP Corporate, the Designated Officers and SP Corporate’s representatives will handle such material non-public information in accordance with applicable laws, including Federal and state securities laws. SP Corporate and its personnel, and the Designated Officers, shall comply with the Company’s policies regarding Confidential Information and insider trading.

 

11.05.               The Company agrees that, during the term of this Agreement, and for a period of one (1) year from the termination of this Agreement, it will not, directly or indirectly, without obtaining the prior written consent of the SP Corporate, solicit for employment, hire or employ any person who has served as a Designated Officer or any other officers or employees of SP Corporate or its affiliates; provided, however, that the restriction on solicitation or hire above shall not restrict the Company’s ability to conduct generalized searches
for employment (including through the use of general or media advertisements, employment agencies and internet postings) not directly targeted towards SP Corporate’s or its affiliates’ officers or employees and hiring any person that ceases to be employed by SP Corporate or an affiliate thereof without the Company’s prior direct solicitation. Notwithstanding anything to contrary in this Agreement, this Section 11.05 shall not apply to John Quicke’s serving as Interim President and Chief Executive Officer of the Company.

 

  

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Section 12.               Non-Exclusive Arrangement; Conflicts of Interest

 

12.01.               The Company acknowledges that SP Corporate and its Affiliated Companies (as defined below) have in the past and may from time to time in the future enter into agreements similar to this Agreement with other companies pursuant to which SP Corporate may agree to provide services similar in nature to Services being provided hereunder, and such agreements shall not constitute a breach of this Agreement; provided, however, that SP Corporate covenants that in doing so SP Corporate shall not breach any of its covenants or obligations expressly
set forth in this Agreement.  The Company understands that the CFO Designee and Reporting Manager Designee, as of the respective dates they are designated to serve as the Designated Officers, may provide services to certain other companies, and such other activities shall not constitute a breach of this Agreement.  The Designated Officers shall not accept any additional [managerial or executive] positions with any other company without prior disclosure to the Committee and if the Committee reasonably determines that such engagement will interfere with such Designated Officer’s performance of Services under this Agreement or his or her duties and responsibilities to the Company, except that the Designated Officers may perform for other companies, on a part-time basis, intermittent or periodic special projects that do not interfere with such Designated
Officer’s performance of Services under this Agreement or his or her duties and responsibilities to the Company without disclosure to or approval by the Company or the Committee.  In addition, to the extent business opportunities arise, the Company acknowledges that SP Corporate will be under no obligation to present such opportunity to the Company, and SP Corporate may, in its sole discretion, present any such opportunity to whatever company it so chooses, or to none at all; provided, however, nothing contained herein shall affect or otherwise limit the fiduciary obligations of the officers and directors of the Company, including the Designated Officers.

 

12.02.               The Company, SP Corporate and their respective Affiliated Companies (as defined below) recognize and acknowledge that as a result of SP Corporate providing Services pursuant to this Agreement the potential for conflicts of interest exist between and/or among SP Corporate, the Company, Affiliated Companies of SP Corporate and the Company and the respective officers and directors of SP Corporate and the Company, including but not limited to (i) that an Affiliated Company of SP Corporate may be a majority or significant stockholder of the
Company, (ii) that directors, officers, members and/or employees of SP Corporate or of Affiliated Companies of SP Corporate may serve as directors and/or officers of the Company, (iii) that SP Corporate and Affiliated Companies thereof may engage and are expected to continue to engage in the same, similar or related lines of business as those in which the Company, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Company, directly or indirectly, may engage, (iv) that SP Corporate and Affiliated Companies thereof may have an interest in the same areas of corporate opportunity as the Company and Affiliated Companies thereof, and (v) that SP Corporate and Affiliated Companies thereof may engage in material business transactions with the Company and Affiliated Companies thereof, including (without limitation) providing
Services to or being a significant supplier of the Company and Affiliated Companies thereof.  SP Corporate and the Company agree that if either of them determines that an actual conflict of interest exists, or if either of them has knowledge of any actions, occurrences, conditions or circumstances that could reasonably be expected to result in a conflict of interest, it shall disclose the fact of such actual or prospective conflict to the other and, in such event, both SP Corporate and the Company shall work cooperatively to either (i) resolve or prevent, as applicable, the conflict of interest in a manner satisfactory to both SP Corporate and the Company or (ii) cease providing or receiving the Services giving rise to such conflict.

 

  

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12.03.               For purposes of this Agreement, “Affiliated Companies” shall mean in respect of SP Corporate any entity which is controlled by SP Corporate, controls SP Corporate or is under common control with SP Corporate (other than the Company and any entity that is controlled by the Company) and in respect of the Company shall mean any entity controlled by the Company.

 

12.04.               The Company represents and warrants that the Committee has approved this Agreement and recommended Board approval, and a majority of the disinterested directors of the Company has voted to approve this Agreement.

 

Section 13.                Independence

 

13.01.               Except as specifically provided herein, none of the parties shall act or represent or hold itself out as having authority to act as an agent or partner of any other party, or in any way bind or commit any other party to any obligations.  Nothing contained in this Agreement shall be construed as creating a partnership, joint venture, agency, trust or other association of any kind, each party being individually responsible for its obligations set forth in this Agreement.  SP Corporate or its officers, employees and
representatives shall not have the authority to act for, bind, or otherwise commit the Company or any of its subsidiaries or affiliates, and neither SP Corporate nor any of its officers, employees or representatives shall hold itself or themselves out as having any such authority, except (i) for the CFO Designee’s authority to act as the Chief Financial Officer of the Company and perform his or her duties in that position, (ii) for the Reporting Manager Designee’s authority to act as the Reporting Manager of the Company and perform his or her duties in that position, and (iii) to the extent that such authority has been specifically granted to SP Corporate or any of its officers, employees and representatives by the Committee.

 

13.02.               Neither party shall be responsible for the compensation, the withholding of taxes, workers compensation, employee benefits or any other employer liability for the employees and agents of the other party.  Without limiting the generality of the foregoing, the parties acknowledge and agree that SP Corporate is an independent contractor and that none of SP Corporate, the CFO Designee or the Reporting Manager Designee is an employee of the Company.  SP Corporate or an Affiliated Company of SP Corporate shall timely
withhold and pay all taxes and file all reports required by applicable law to be withheld, paid and filed for the Designated Officers.

 

  

12

  

Section 14.               General

 

14.01.               This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior representations and agreements, whether oral or written, and cannot be modified, changed, waived or terminated except by a writing signed by both of the parties hereto.  No course of conduct or trade custom or usage shall in any way be used to explain, modify, amend or otherwise construe this Agreement.

 

14.02.               All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered, sent by nationally recognized overnight carrier, one day after being sent, or mailed by first class registered or certified mail, return receipt requested, five days after being sent.

 

14.03.               This Agreement shall be governed by and construed under the laws of the State of New York and the parties hereby submit to the personal jurisdiction of any federal or state court located therein, and agree that jurisdiction shall rest exclusively therein, without giving effect to the principles of conflict of laws.

 

14.04.               Except as provided in Section 5 of this Agreement, this Agreement may not be assigned directly or indirectly, by operation of law or otherwise, by any party hereto (including in connection with a sale or transfer of all or substantially all of business or assets of such party, whether by sale, merger, operation of law, or otherwise in connection with a change of control) without the prior written consent of the other parties to this Agreement.  This Agreement shall solely inure to the benefit of and be binding upon the parties
hereto and their permitted (in accordance with the foregoing) successors and assigns.

 

14.05.               This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

 

14.06.               Sections 8, 9, 10, 11 and 14.03 and this Section 14.06 shall survive any expiration or termination of this Agreement.

 

  

13

  

The parties have duly executed this Agreement as of the date first above written.

 

	 	SP CORPORATE SERVICES LLC	 
	 	 	 	 
	
 

	
By: 

	/s/ Sanford Antignas	 
	 	 	Name:  Sanford Antignas	 
	 	 	Title:    Chief Operating Officer	 
	 	 	 	 

	 	ADPT CORPORATION	 
	 	 	 	 
	
 

	
By: 

	/s/ John J. Quicke	 
	 	 	Name:   John J. Quicke	 
	 	 	Title:     Interim President	 

 

 

  

  

  

 

EXHIBIT A

PRIMARY SERVICES

 

The CFO Designee, in his or her capacity as Chief Financial Officer, will perform all duties normally associated with that of a Chief Financial Officer, including without limitation:

 

	
  

	
·

	
Responsibility for any and all financing matters for the Company and its subsidiaries including but not limited to debt, equity or other financings, whether through the public markets or in private transactions, or otherwise, including the negotiation and consummation of all of the foregoing.

 

	
  

	
·

	
Review of annual and quarterly budgets and related matters.

 

	
  

	
·

	
Supervise and administer, as appropriate, all accounting/financial duties and related functions on behalf of the Company for its operations and business matters (including control of the Company’s cash, checking accounts, revenue receipts, disbursements, bookkeeping, accounts, ledgers, billings, payroll and related matters).

 

	
  

	
·

	
Supervise and manage, as appropriate, all SEC filing obligations.

 

	
  

	
·

	
Other similar items.

 

The Reporting Manager Designee, in his or her capacity as the Financial Reporting Manager, will perform all duties normally associated with that of a Financial Reporting Manager, including without limitation:

 

	
  

	
·

	
Supervise, manage and assist in, as appropriate, all SEC filing obligations and related preparation of the materials supporting the content of such SEC filings.

 

	
  

	
·

	
Other similar items.

 

 

 The monthly fee for providing the Primary Services shall be $35,000.00, paid in advance on the first day of the month.

 

  

  

  

EXHIBIT B

 

DELEGATION OF AUTHORITY

 

As of October 1, 2011

 

 

ADPT DELEGATION/LIMITATION OF AUTHORITY

 

	1	 	 
	 	 	 
	r 	Require ADPT Board Approval
	 	 	 
	 	r	All Acquisitions — ADPT Board approval required before binding agreement executed [Board to be informed when LOI signed, or DD started]
	 	 	 
	 	r	All Employment Agreements
	 	 	 
	 	r	All Equity Grants [CC of Board]
	 	 	 
	 	r	Compensation for CEO direct reports [CC of Board]
	 	 	 
	 	r	All individual unbudgeted expenditures in excess of $250,000 
	 	 	 
	 	r	Audit Committee approval required on all related party transactions with Steel Partners Holdings
	 	 	 
	 r  	ADPT Interim President and CEO
	 	 	 
	 	r	Authority to operate ADPT Corporation consistent with the approved ADPT Corporation 2011 Budget.
	 	 	 
	 	r	Authority to hire employees and contractors as required with annual base salaries or payments not to exceed $500,000 [direct reports to CEO require approval of CC of Board].
	 	 	 
	 	r	Until proper infrastructure in place at ADPT Sports, all cash balances will be maintained at ADPT Corporation. 
	 	 	 
	 	r	Authority to approve all individual unbudgeted expenditures up to $250,000.
	 	 	 
	 	r	CEO sign off required before executing any legal documents, non standard NDA's, all LOI's, and all acquisition agreements.
	 	 	 
	 r  	President ADPT Sports
	 	 	 
	 	r	Authority to operate ADPT Sports consistent with the approved ADPT Sports Business Plan and the approved ADPT Sports 2011 Budget.
	 	 	 
	 	r	Duty to inform BOD of any significant change anticipated in 2011 forecasted results versus 2011 Budget.
	 	 	 
	 	r	Authority to hire employees and contractors as required with annual base salaries or payments not to exceed $500,000.
	 	 	 
	 	r	Authority to approve all individual unbudgeted expenditures up to $250,000.
	 	 	 
	 	r	Authority to enter NDA's, non-binding LOI's, and to engage in Due Diligence on acquisitions [Board of Directors to be informed when LOI signed, or DD started; and sign off of CEO required on all legal documents, non standard NDA's, all LOI's, and all acquisition agreements]ex10-i.htm

Exhibit 10(i)

 

EMPLOYMENT AGREEMENT

 

This Agreement (this "Agreement"), dated as of September 30, 2011, and effective as of October 1, 2011, is made by and between Ethan Allen Interiors Inc., a Delaware corporation (the “Corporation”) and its subsidiary, Ethan Allen Global, Inc., a Delaware corporation and a wholly owned subsidiary of the Corporation (the "Subsidiary") and M. Farooq Kathwari (the "Executive").

 

Recitals

 

	
1.

	
The Executive is Chairman of the Board of Directors of the Corporation and of the Subsidiary, and is currently employed as the Chief Executive Officer and the President of the Corporation and the Subsidiary.

 

	
2.

	
The employment of the Executive by the Corporation was previously subject to employment agreements dated (a) July 27, 1994 (the "1994 Employment Agreement"), (b) October 28, 1997 (the "1997 Employment Agreement"), (c) November 1, 2002 as amended by the First Amendment dated as of November 1, 2002 and subject to the Assignment of Employment Agreement assigning the interests and obligations of Ethan Allen Retail Inc. (formerly known as Ethan Allen Inc.) to Ethan Allen Global, Inc. effective as of July 1, 2005 (collectively, the "2002 Employment Agreement"), and is currently subject to (d) an employment agreement dated November 13, 2007 (the "2007 Employment Agreement").  The 1994 Employment Agreement, the 1997 Employment Agreement, the 2002 Employment Agreement and the 2007 Employment
Agreement are hereinafter collectively referred to as the “Prior Employment Agreements.”

 

	
3.

	
The Corporation desires to continue the services of the Executive as Chairman of the Board of Directors of the Corporation and the Subsidiary and the employment of the Executive with the Corporation and the Subsidiary and to enter into this new agreement embodying the terms of those continued relationships.

 

	
4.

	
The Executive is willing to continue to serve as Chairman of the Board of Directors of the Corporation and the Subsidiary and is willing to accept continued employment by each of the Corporation and the Subsidiary on the terms set forth herein.

 

Agreement

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, and other good and valuable consideration, the Corporation and the Executive hereby agree as follows.

 

	
1. 

	
Definitions.

 

	
1.1.

	
"Affiliate" means any person or entity controlling, controlled by or under common control with the Corporation.

	
1.2.

	
"Board" means the Board of Directors of the Corporation.

	
1.3.

	
"Cause" means (a) the Executive is convicted of a felony involving actual dishonesty as against the Corporation or the Subsidiary and any Affiliate, or (b) the Executive, in carrying out his duties and responsibilities under this Agreement, is guilty of gross neglect or gross misconduct resulting, in either case, in material economic harm to the Corporation, the Subsidiary and/or Affiliate, and such conduct is not cured within thirty (30) days of the Corporation providing Notice of Termination  (to take effect only if such conduct is not cured) to the Executive, unless such act, or failure to act, was believed by the Executive in good faith to be in the best interests of the Corporation and/or the Subsidiary.  Good Faith is defined as actions taken, or failures to act,
based upon advice of counsel or advice of certified public accountant(s).

	
1.4.

	
"Commencement Date" has the meaning assigned to it in Section 3.

 

  

  

  

 

	
1.5.

	
"Date of Termination" means (a) in the case of a termination as a result of Disability,  the date of a final determination of Disability pursuant to the process set forth in Section 1.6, (b) in the case of a termination for which a Notice of Termination is required, the date of actual receipt of such Notice of Termination or, if later, the date specified therein, as the case may be, and (c) in all other cases, the actual date on which the Executive's employment terminates during the Term of Employment.

	
1.6.

	
"Disability" means the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.  Determination of Disability in accordance with this Agreement shall be made pursuant to the written medical opinion of an independent medical physician mutually acceptable to the Executive and the Corporation but in no event will the determination of Disability be made before the end of 12 months from date the Executive is unable to engage in substantial gainful activity.   If the Executive and the Corporation cannot agree as to such an independent medical physician, each shall appoint one
medical physician and those two physicians shall appoint a third physician who shall make such determination.

	
1.7.

	
"Good Reason" means and shall be deemed to exist if, without the prior express written consent of the Executive:

(a) the Executive is assigned any duties or responsibilities inconsistent in any material respect with the scope of the duties or responsibilities associated with the Executive's titles or positions, as set forth and described in Section 4 of this Agreement;

(b) the Executive suffers a reduction in the duties, responsibilities or effective authority associated with his titles and positions as set forth and described in Section 4 of this Agreement;

(c) the Executive is not appointed to, or is removed from, the offices or positions provided for in Section 4.1 of this Agreement;

(d) the Corporation fails to substantially perform any material term or provision of this Agreement;

(e) the Executive's compensation provided for hereunder is decreased;

(f) the Executive's office location is changed to a location more than 50 miles from its location on the date hereof in Danbury, Connecticut;

(g) the Corporation fails to obtain the full assumption of this Agreement by a successor entity in accordance with Section 11.2 of this Agreement;

(h) the Corporation continually fails to reimburse the Executive for business expenses in accordance with Section 5.5 of this Agreement;

(i) the Corporation purports to terminate the Executive's employment for Cause and such purported termination of employment is not effected in accordance with the requirements of this Agreement;

(j) the Executive shall cease to serve as a director and Chairman of the Board of Directors of  the Corporation and the Subsidiary;

(k) the Board or the shareholders of the Corporation or the Subsidiary, either or both, as may be required to authorize the same, shall approve (i) any liquidation of the Corporation or the Subsidiary, or the sale of substantially all of the assets of the Corporation and the Subsidiary taken as a whole, or (ii) any merger, consolidation and/or other business combination involving the Corporation or the Subsidiary or any combination of any such transactions (a "Transaction"), other than a Transaction (A) involving only the Corporation and the Subsidiary, or (B) immediately after which the shareholders of the Corporation who were shareholders immediately prior to the transaction continue to own
beneficially, directly or indirectly, in substantially similar proportions to those in effect immediately prior to such transaction more than 50% of the then outstanding voting securities of the Corporation or the survivor, as applicable;

 

  

  

  

(1) any Person (as defined below) or group (as such term is defined in Rule 13d-5 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of related Persons which is not an Affiliate of the Corporation or the Subsidiary as of the Commencement Date shall beneficially own, directly or indirectly, more than 50% of the then outstanding voting stock of the Corporation or the Subsidiary (for purposes of this Agreement, "Person(s)" means any individual, entity, or other person, as defined in Section 3(a)(9) of the Exchange Act, and as used in Sections 13(d) and 14(d) thereof); or

(m) the Board or the Corporation shall authorize, approve or engage in any Business Combination with an Interested Person, each as defined in Article Fifth of the Corporation's Restated Certificate of Incorporation;

provided that, notwithstanding the foregoing, Good Reason shall not include or be deemed to exist, with regard to the circumstances described in clause (k), (1) or (m), if, with the express prior written consent of Executive, Executive immediately after the occurrence of the circumstances or transactions described in clause (k), (1) or (m) becomes Chairman, Chief Executive Officer and President of the parent corporation or of the person or entity that owns or controls the Corporation or its successor immediately after such circumstances or transaction (or is offered such positions, but declines).

	
1.8.

	
“Notice of Termination.”  In the case of any termination of the Executive's employment by the Corporation or Subsidiary or by the Executive that requires “Notice of Termination,” such notice shall be in writing and shall be communicated in accordance with Section 12.3 of this Agreement.  Such Notice of Termination shall (a) indicate the specific termination provision in this Agreement relied upon, (b) set 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, as applicable, and (c) if the termination date is other than the date of receipt of such notice, specify the date on which the Executive's employment is to be terminated (which date shall
not be earlier than the date on which such notice is actually given).

	
1.9.

	
"Retirement" means the Executive's voluntary termination of his employment with the Corporation and/or Subsidiary for any reason at any time after the Commencement Date of this Agreement upon the Notice of Termination required in Section 6.4.

	
1.10. 

	
"Term of Employment" has the meaning assigned to it in Section 3.

	
1.11

	
“Change in Control” shall be deemed to be triggered if:

(a) the Board or the shareholders of the Corporation or the Subsidiary, either or both, as may be required to authorize the same, shall approve (i) any liquidation of the Corporation or the Subsidiary, or the sale of substantially all of the assets of the Corporation and the Subsidiary taken as a whole, or (ii) any merger, consolidation and/or other business combination involving the Corporation or the Subsidiary or any combination of any such transactions (a "Transaction"), other than a Transaction (A) involving only the Corporation and the Subsidiary, or (B) immediately after which the shareholders of the Corporation who were shareholders immediately prior to the transaction continue to own
beneficially, directly or indirectly, in substantially similar proportions to those in effect immediately prior to such transaction more than 50% of the then outstanding voting securities of the Corporation or the survivor, as applicable;

(b) any Person (as defined below) or group (as such term is defined in Rule 13d-5 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of related Persons which is not an Affiliate of the Corporation or the Subsidiary as of the Commencement Date shall beneficially own, directly or indirectly, more than 50% of the then outstanding voting stock of the Corporation or the Subsidiary (for purposes of this Agreement, "Person(s)" means any individual, entity, or other person, as defined in Section 3(a)(9) of the Exchange Act, and as used in Sections 13(d) and 14(d) thereof); or

 

  

  

  

(c) the Board of the Corporation shall authorize, approve or engage in any Business Combination with an Interested Person, each as defined in Article Fifth of the Corporation’s Restated Certificate of Incorporation.

	
2. 

	
Employment.

	
2.1

	
The Corporation and the Subsidiary acknowledge and agree that the Executive has fully and satisfactorily performed his obligations under the Prior Employment Agreements. Executive acknowledges and agrees that the Corporation and the Subsidiary have fully and satisfactorily performed their respective obligations under the Prior Employment Agreements, subject, however, to any remaining compensation or benefits due with respect to services rendered prior to the Commencement Date.

 

	
2.2

	
Upon execution of this Agreement, the terms of Executive’s employment shall cease to be governed by the 2007 Employment Agreement and such cessation shall be effective as of the Commencement Date of this Agreement, provided however, that any compensation and other benefits including but not limited to Base Salary, Restricted Stock Awards and Stock Options earned by the Executive for services rendered prior to the Commencement Date of this Agreement, and the Annual Incentive Bonus for the fiscal year ending June 30, 2011, shall continue to be governed by the 2007 Employment Agreement.  Also, nothing contained in this Agreement shall adversely affect any continuing obligations of the Corporation to the Executive under any Prior Employment Agreements including but not limited to
the Corporation’s obligations to the Executive with respect to excise tax, if any, and tax reimbursement payments for tax years covered by Prior Employment Agreements.

	
2.3

	
Subject to the terms and provisions set forth in this Agreement, the Corporation hereby employs the Executive during the Term of Employment as the Chief Executive Officer and President of the Corporation, agrees to use its best efforts to cause Executive to be elected by the Corporation's shareholders as a director and Chairman of the Board of the Corporation, and to cause the Executive to be a director and Chairman of the Board of Directors of the Subsidiary during the Term of Employment and agrees to cause the Subsidiary at all times during the Term of Employment to employ the Executive as Chief Executive Officer and President of the Subsidiary, and the Executive hereby accepts such employment. However, nothing in this Agreement shall be construed to require that the Executive be elected as
a director of the Corporation's Board of Directors on any date if he is not employed by the Corporation on the election date.

	
3. 

	
Commencement Date and Term of Employment.

 

	
3.1.

	
The term of employment under this Agreement shall commence as of  October 1, 2011 (the “Commencement Date"), and shall, unless extended as hereinafter provided, terminate with the close of business on June 30, 2016, unless sooner terminated pursuant to the terms hereof (the "Term of Employment").

 

	
3.2.

	
On July 1, 2016 and on July 1, 2017, the Term of Employment shall automatically be extended for an additional one year period unless, not later than nine months prior to any such anniversary, either party to this Agreement shall have given written notice to the other that the Term of Employment shall not be extended or further extended beyond its then already automatically extended term, if any.

	
4. 

	
Positions, Responsibilities and Duties.

 

	
4.1.

	
Positions. During the Term of Employment, the Executive shall be employed as, and the Corporation shall at all times cause the Executive to be, the Chief Executive Officer and President of the Corporation and the Subsidiary. In such positions, the Executive shall have the duties, responsibilities and authority normally associated with the office and position of chairman, director, chief executive officer and president of a substantial, publicly traded corporation, but in no event shall the Executive's duties, responsibilities and/or effective authority with respect to the Corporation and/or the Subsidiary be less than the duties, responsibilities and effective authority the Executive possessed immediately prior to the date of
this Agreement. No other employee of the Corporation or the Subsidiary shall have authority and responsibilities that are equal to or greater than those of the Executive. The Executive shall report solely and directly to the Board and all other officers and other employees of the Subsidiary shall report directly to the Executive or the Executive's designees. No provision of this Section 4.1, however, shall preclude the Board from soliciting information from any officer or employee of the Corporation.

 

  

  

  

 

	
4.2.

	
Duties. During the Term of Employment, the Executive shall devote such time as is reasonably necessary to perform the duties associated with his offices and positions as set forth in Section 4.1 and shall use his best efforts to perform faithfully and efficiently the duties and responsibilities contemplated by this Agreement; provided, however, that the Executive shall not be required to perform any duties and responsibilities which would be likely to result in non-compliance with or violation or breach of any applicable law or regulation. The Executive’s duties shall include, but not be limited
to participating in the Corporation’s planning for executive leadership succession.  Notwithstanding the foregoing provisions of this Section 4.2, during the Term of Employment, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and similar type activities, to the extent that such other activities do not inhibit or prohibit the performance of the Executive's duties under this Agreement, or conflict in any material way with the business of the Corporation or the Subsidiary; provided, however, that the Executive shall not serve on the board of any business, or hold any other
position with any business without the consent of the Board.

 

	
4.3.

	
Non-Disparagement. The Executive agrees that, while he is employed by the Corporation, and after his Date of Termination, he shall not make any false, defamatory or disparaging statements about the Corporation, the Subsidiary, any Affiliate, or the officers or directors of the Corporation, the Subsidiary or any Affiliate that are reasonably likely to cause material damage to the Corporation, the Subsidiary, any Affiliate, or the officers or directors of the Corporation, the Subsidiary, or the Affiliates. While the Executive is employed by the Corporation, and after his Date of Termination, the Corporation agrees, on behalf of itself, the Subsidiary and the Affiliates, that neither the Corporation, the Subsidiary, the Affiliates,
nor the officers or directors of the Corporation, the Subsidiary, or any of the Affiliates shall make any false, defamatory or disparaging statements about the Executive that are reasonably likely to cause material damage to the Executive.

 

	
5. 

	
Compensation and Other Benefits.

 

	
5.1.

	
Base Salary.  Throughout the Term of Employment, the Executive shall receive a base salary ("Base Salary"), payable in equal bi-weekly installments, of $1,150,050 per annum, unless a different Base Salary is agreed upon in writing by the Corporation and the Executive.

 

	
5.2

	
Annual Incentive Bonus.   During the Term of Employment, the Executive will be eligible to be paid an annual incentive bonus (the "Annual Incentive Bonus"), subject to approval by the shareholders of the Corporation of the incentive performance components of this Agreement payable  in accordance with Section 162(m) of the Internal Revenue Code and the regulations issued thereunder, based upon the Corporation's Operating Income for each fiscal year beginning with the fiscal year ending June 30, 2012.  Executive will only be entitled to receive the Annual Incentive Bonus with respect to a fiscal year if and to the extent the Operating Income performance goals, described below, are
achieved.

 

	
  

	
The Annual Incentive Bonus for the fiscal year ending June 30, 2012 shall be based upon the following formula:

 

	
Operating Income

	
Annual Incentive Bonus

	
Less than $25 million

	
$0

	
At least $25 million

	
Two percent (2%) of such threshold (i.e. $500,000)

	
Over $25 million, up to $50 million

	
The above, plus four and one-half percent (4.5%) of such excess

	
Over $50 million, up to $90 million

	
The above, plus three and one-half percent (3.5%) of such excess

	
Over $90 million

	
The above, plus one and one-half percent (1.5%) of such excess

  

  

  

 

	
  

	
Thus, by way of example, if the Corporation's Operating Income for fiscal year ending June 30, 2012 is $60 million, the Executive’s Annual Incentive Bonus for the fiscal year ending June 30, 2012 shall be $1.975 million ($500,000 + $1,125,000 + $350,000).

 

	
  

	
The Annual Incentive Bonus for each fiscal year following the fiscal year ending June 30, 2012 also shall be based upon the above formula; provided, however, that the Operating Income thresholds each shall be increased by $2 million in each fiscal year following the fiscal year ending June 30, 2012.  Thus, for example, the Annual Incentive Bonus for the fiscal year ending June 30, 2013 shall be based upon the following:

 

	
Operating Income

	
Annual Incentive Bonus

	
Less than $27 million

	
$0

	
At least $27 million

	
Two percent (2%) of such threshold (i.e. $540,000)

	
Over $27 million, up to $52 million

	
The above, plus four and one-half percent (4.5%) of such excess

	
Over $52 million, up to $92 million

	
The above, plus three and one-half percent (3.5%) of such excess

	
Over $92 million

	
The above, plus one and one-half percent (1.5%) of such excess

 

	
  

	
For purposes of computing the Executive’s Annual Incentive Bonus, the Corporation's Operating Income for each fiscal year shall be as set forth in the Corporation's financial statements, adjusted by adding thereto the charges, expenses or accruals, if any, charged against such operating income for (1) non­recurring or extraordinary items, (2) Annual Incentive Bonuses paid in respect of the immediately prior fiscal year under this Agreement, (3) the issuance  to the Corporation's executives, managers, employees, dealers and other business associates of capital stock of the Corporation, or the issuance or exercise to or by such persons of options, warrants or other rights to acquire capital stock of the Corporation, or stock appreciation rights of the Corporation or similar
equity equivalents, including in respect of the Restricted Stock Agreement and the Stock Option Agreements contemplated by this Agreement, and (4) any increased depreciation, amortization or other charges resulting from purchase accounting adjustments (provided, however, that no such adjustments shall be made under this clause (4) with respect to acquisitions occurring prior to the Commencement Date). The calculation of Operating Income will be confirmed by the Corporation's independent public accountants or any other independent, recognized financial or accounting expert retained by the Compensation Committee.  The Compensation Committee shall not exercise any discretion in determining the Corporation’s Operating Income pursuant to this Section 5.2.

	
  

	
(a)

	
Notwithstanding the foregoing provisions of this Section 5.2, if the Corporation effects a major acquisition which acquisition constitutes a change of ownership or control of the Corporation within the meaning of Treas. Reg. Section 1.162-27(e)(2)(v) during any fiscal year, the Executive and the Corporation shall negotiate in good faith an appropriate revision to the threshold amount set forth in this Section 5.2 to implement the purpose of the Annual Incentive Bonus such that the Annual Incentive Bonus may be payable even if the threshold amount is not achieved with respect to such fiscal year.  However, in no event shall an acquisition or change in control be a Change in Control, unless the change in control is also a Change in Control pursuant to Section 1.11.

 

	
  

	
(b)

	
As soon as practicable after the end of each fiscal year but before the Annual Incentive Bonus is paid in respect of such fiscal year, the Compensation Committee of the Board of Directors of the Corporation shall certify in writing (i) whether (and to the extent that) the performance goals described in Section 5.2 of this Agreement have been attained and (ii) the amount of the Annual Incentive Bonus payable in respect of the fiscal year.  Under no circumstance may the Annual Incentive Bonus be greater than the amount described in this Section 5.2.  The Annual Incentive Bonus in respect of any particular fiscal year will be paid upon the earlier to occur of the fifth business day following public filing or disclosure of the Corporation's financial statements for such fiscal
year or the 120th day following the end of such fiscal year.

 

  

  

  

 

	
  

	
(c)

	
Notwithstanding any other provision in this Agreement to the contrary, the Executive’s right to receive (or retain) any Annual Incentive Bonus is conditional upon the achievement of the performance goals described in this Section 5.2.

 

	
5.3.

	
Restricted Stock Awards.   The Executive shall be awarded shares of the Corporation's common stock, par value $.01 per share ("Common Stock") that shall vest with the passage of time (the “Vesting Date”), subject to accelerated vesting for certain types of terminations as more particularly set forth in Section 6 of this Agreement.  The awarded shares shall be restricted stock under the Corporation's 1992 Stock Option Plan (as amended from time to time in accordance with its terms, the "Stock Option Plan") and subject to the terms of separate restricted stock agreement which shall be executed by the Executive and the Corporation in substantially the form of Exhibit A hereto (the
“Restricted Stock Agreement”). Such shares are referred to as "Restricted Stock" for purposes of this Agreement.  In the event of any inconsistency between the Stock Option Plan and this Agreement, the Stock Option Plan shall govern.

	
  

	
(a)

	
The Executive will receive 105,000 shares of Restricted Stock as of the date the shareholders approve the incentive compensation components of this Agreement (the "Approval Date"), and such shares will vest in five equal proportions of 21,000 shares each on June 30, 2012, on June 30, 2013,  on June 30, 2014, on June 30, 2015 and on June 30, 2016, unless vested sooner in accordance with this Agreement or the applicable Restricted Stock Agreement.

	
  

	
(b)

	
Additional Restricted Stock awards may be made by agreement of the Corporation and the Executive pursuant to a separate Restricted Stock Agreement in substantially the form of Exhibit A hereto which agreement shall include the requirements for vesting of each additional award of Restricted Stock.

	
  

	
(c)

	
The number of shares subject to each of the Restricted Stock awards set forth in this Agreement is specified as of the date of this Agreement, and such numbers of shares shall be adjusted for stock splits, stock dividends, reclassifications, recapitalizations and similar events in respect of the Common Stock occurring after the date of this Agreement.

 

	
 5.4

	
Stock Options.  The Executive shall be granted options to purchase shares of the Corporation's Common Stock under the Stock Option Plan and subject to the terms of the stock option agreement in substantially the form of Exhibit B hereto. Such stock options are referred to as "Options" for purposes of this Agreement.

	
  

	
 (a)

	
The Executive will be granted Options to purchase 300,000 shares of Common Stock.  as of the Approval Date, and such Options will vest in five equal proportions of 60,000 shares each on June 30, 2012, on June 30, 2013, on June 30, 2014 on June 30, 2015 and on June 30, 2016, unless vested sooner in accordance with this Agreement or the applicable Stock Option Agreement.

	
  

	
(b)

	
Additional Options may be granted by agreement of the Corporation and the Executive pursuant to a separate Stock Option Agreement in substantially the form of Exhibit B hereto which agreement shall include the requirements for vesting of each additional granted Option.

	
  

	
(c)

	
Each Stock Option Agreement shall provide that the Executive may transfer all or part of the Options to a family trust or to immediate family members that is considered to be related to the Executive for purposes of Treasury Regulation section 1.83-7(a).

	
  

	
(d)

	
The number of shares subject to any granted Stock Options under this Agreement is specified as of the date of this Agreement, and such numbers of shares shall be adjusted for stock splits, stock dividends, reclassifications, recapitalizations and similar events in respect of the Common Stock occurring after the date of this Agreement.

 

  

  

  

 

	
5.5.

	
Expense Reimbursement. During the Term of Employment, the Executive shall be entitled to receive prompt reimbursement for all usual, customary, and reasonable business-related expenses incurred by the Executive in performing his duties and responsibilities hereunder in accordance with the practices and procedures of the Corporation as in effect and applied immediately prior to the Commencement Date, including without limitation an automobile and driver allowance and/or reimbursement in accordance with past practices, or, if more favorable to the Executive, as provided by the Corporation or the subsidiary at any time thereafter. Up to 10% of the use of the Corporation-provided automobile may be for personal use.

 

	
5.6. 

	
Vacation and Fringe Benefits.

 

	
  

	
(a)

	
During the Term of Employment, the Corporation shall reimburse the Executive for life and disability insurance in respect of the Executive for the benefit of Executive and/or his beneficiary(ies). The aggregate amount of such insurance coverage reimbursed by the Corporation shall be determined by the premium cost; the Corporation shall pay an aggregate annual premium of $50,000 for such coverage, or such lesser amount as the Corporation and the Executive determine.

 

	
  

	
(b)

	
During the Term of Employment, the Executive shall also be entitled to such paid vacation, fringe benefits and perquisites as provided to the Executive by the Corporation and/or the Subsidiary immediately prior to the Commencement Date or, if more favorable to the Executive, as provided by the Corporation or the Subsidiary at any time thereafter.

	
  

	
 (c)

	
To the extent that the Executive's rights to compensation or benefits under the applicable plan, agreement or other governing document are to be determined based on the length of his employment with the Corporation or the Subsidiary, all periods of employment with the Corporation, the Subsidiary or the predecessor of either of them shall be counted unless prohibited by the applicable plan, agreement or other governing document.

	
5.7.

	
Office and Support Staff. Unless the Executive otherwise agrees in writing, during the Term of Employment the Executive shall be entitled to executive secretarial and other administrative assistance of a type and extent, and to an office or offices (with furnishings and other appointments) of a type and size, at least equal to that provided to the Executive immediately prior to the date of this Agreement.

	
6.

	
Termination.  Prior to the expiration of the Term of Employment, the Executive’s employment under this Agreement may be terminated only in the manner set forth in this Section 6.

	
6.1.

	
Termination Due to Death or Disability.  The Corporation may terminate the Executive's employment hereunder due to Disability, and the Executive's employment hereunder shall  terminate in the event of his death.  In the event of the Executive's death or a termination of the Executive's employment by the Corporation due to Disability, the Executive, his beneficiary (as defined in Section 12.7 of this Agreement), as the case may be, shall be entitled to receive:

 

	
  

	
(a)

	
Base Salary continuation at the rate in effect on the Date of Termination (as provided for by Section 5.1 of this Agreement) for a period of twelve (12) months from and after the Date of Termination, payable in accordance with the Corporation’s standard payroll practices commencing on the first payroll immediately following the Date of Termination;

 

	
  

	
(b)

	
if and to the extent the applicable performance goals are achieved as determined in accordance with Section 5.2 of this Agreement,, the Annual Incentive Bonus in respect of the full fiscal year in which the Date of Termination occurs, shall be payable at the same time such Annual Incentive Bonus would have been paid had the Executive not terminated employment;

 

	
  

	
(c)

	
any Restricted Stock Awards that are due to be received by the Executive on or before the Date of Termination and all outstanding Restricted Stock Awards shall fully vest as of the Date of Termination;

 

	
  

	
(d)

	
any Stock Options that are due to be granted to the Executive on or before the Date of Termination and all outstanding Stock Options shall fully vest as of the Date of Termination;

 

  

  

  

 

	
  

	
(e)

	
any deferred compensation not yet paid to the Executive (including, without limitation, interest or other credits on such deferred amounts) to be paid at the time provided in the applicable deferred compensation plan, any accrued vacation pay and insurance proceeds;

 

	
  

	
(f)

	
reimbursement for expenses incurred but not yet paid prior to the Date of Termination;

 

	
  

	
(g)

	
aggregate annual premiums for insurance coverage through the Date of Termination in the event of a death, and for a period of twelve (12) months from and after the Date of Termination in the event of a Disability, to be paid in a lump sum no later than seventy-five (75) days following the Date of Termination;

 

	
  

	
(h)

	
any other compensation or benefits which may be owed or provided to the Executive in accordance with the terms and provisions of any applicable agreements, plans and programs of or made by the Corporation and/or the Subsidiary;

 

	
  

	
(i)

	
the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Corporation to surviving families of employees of the Corporation under such plans, programs, practices and policies relating to family death benefits, if any, in accordance with the most favorable plans, programs, practices and policies of the Corporation in effect on the date of the Executive's death with respect to other key employees of the Corporation and their families; and

 

	
  

	
(j)

	
anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled after the Date of Termination due to Disability to receive disability and other benefits at least equal to the most favorable of those provided by the Corporation to disabled employees and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, in effect at any time during the 90-day period immediately preceding the Date of Termination due to Disability with respect to other key employees of the Corporation and their families.

	
6.2.

	
Termination by the Corporation for Cause.  The Corporation may terminate the Executive's employment hereunder for Cause (as “Cause” is defined in Section 1.3) as provided in this Section 6.2.  In any case described in this Section 6.2, the Executive shall be given written Notice of Termination authorized by a vote of at least a majority of the members of the Board that the Corporation intends to terminate the Executive's employment for Cause. Such written Notice of Termination for Cause may be given only within ninety (90) business days after a director of the Corporation (excluding the Executive) has actual knowledge of the events giving rise to such purported Cause. The Executive shall be given
the opportunity within 30 calendar days of the receipt of such Notice of Termination to meet with the Board to defend such act or acts, or failure to act, and, if such act or failure to act is correctable, the Executive shall be given 30 business days after such meeting to correct such act or failure to act. If such act or failure to act is not correctable or upon failure of the Executive, within such latter 30 day period, to correct such act or failure to act, the Executive's employment by the Corporation shall automatically be terminated under this Section 6.2 for Cause as of the date determined in Section 1.5 of this Agreement. Anything herein to the contrary notwithstanding, if, following a termination of the Executive's employment by the Corporation for Cause based upon the conviction of the Executive for a felony involving actual dishonesty as against the
Corporation,  Subsidiary or an Affiliate, such conviction is overturned on appeal, the Executive shall be entitled to the payments and benefits that the Executive would have received as a result of a termination of the Executive's employment by the Corporation without Cause in a lump sum no later than 75 days following the date the conviction is overturned.

If the Corporation terminates the Executive's employment hereunder for Cause, the Executive shall be entitled to receive:

	
  

	
(a)

	
Base Salary continuation at the rate in effect on the Date of Termination (as provided for by Section 5.1 of this Agreement) through the Date of Termination payable in accordance with the Corporation’s standard payroll practices;

 

  

  

  

 

	
  

	
 (b)

	
any Restricted Stock Awards that are due to be received by the Executive on or before the Date of Termination, if any, but the portion of any such Restricted Stock Awards that are not vested as of the Date of Termination shall be forfeited;

 

	
  

	
(c)

	
any Stock Options that are due to be granted to the Executive on or before the Date of Termination, if any, but the portion of any such Stock Options that are not vested as of the Date of Termination shall be forfeited;

 

	
  

	
(d)

	
any deferred compensation (including, without limitation, interest or other credits on such deferred amounts) to be paid at the time provided in the applicable deferred compensation plan and any accrued vacation pay;

	
  

	
(e)

	
reimbursement for expenses incurred, but not yet paid prior to such termination of employment;

	
  

	
(f)

	
aggregate annual premiums for insurance coverage through the Date of Termination in respect of the life and Disability insurance referred to in Section 5.6(a); to be paid in a lump sum no later than seventy-five (75) days following the Date of Termination; and

	
  

	
(g)

	
any other compensation or benefits which may be owed or provided to the Executive in accordance with the terms and provisions of any applicable agreements, plans and programs of or made by the Corporation and/or the Subsidiary.

	
6.3

	
Termination by the Corporation Without Cause or Termination by the Executive For Good Reason. The Corporation shall be permitted to terminate the Executive's employment hereunder without Cause but only in accordance with the Notice of Termination provisions of this Agreement; and the Executive shall be permitted to terminate his employment hereunder for Good Reason only in accordance with the Notice of Termination provisions of this Agreement. For purposes of this Agreement, such a termination of employment by the Executive shall constitute a "Termination for Good Reason" only if affected in accordance with the Notice of Termination provisions of this Agreement.  Such written Notice of Termination given by the Executive
for Good Reason may be given only within one hundred eighty (180) business days after the Executive has actual knowledge of the events constituting Good Reason, and such written Notice of Termination for Good Reason shall specify the particular act or acts, or failure to act, which is or are the basis for the Good Reason. The Corporation shall be given the opportunity within 30 calendar days of the receipt of such Notice of Termination for Good Reason to meet with the Executive to defend such act or acts, or failure to act, and, if such act or failure to act is correctable, the Corporation shall be given 30 business days after such meeting to correct such act or failure to act. If such act or failure to act is not correctable or upon failure of the Corporation, within such latter 30 day period, to correct such act or failure to act, the Executive's employment by the Corporation shall
automatically be terminated under this Section 6.3. If the Corporation terminates the Executive's employment hereunder without Cause, other than due to death or Disability, or if the Executive effects a Termination for Good Reason, the Executive shall be entitled to receive:

 

	
  

	
 (a)

	
Base Salary at the rate in effect on the Date of Termination (as provided for by Section 5.1 of this Agreement)  and for twenty-four (24) months thereafter, ) payable in accordance with the Corporation’s standard payroll practices commencing on the first payroll immediately following the Date of Termination;

	
  

	
(b)

	
an aggregate amount not to exceed $2 million in the aggregate, but otherwise equal to the sum of the two largest Annual Incentive Bonuses or other cash bonuses previously received by Executive from the Corporation for any fiscal year commencing with the 2002 fiscal year whether when employed under this Agreement, when employed under any of the Prior Employment Agreements or when employed under any other arrangement with the Corporation to be paid in a lump sum no later than seventy-five (75) days following the Date of Termination;

 

	
  

	
(c)

	
Restricted Stock Awards which would vest within one (1) year of the Date of Termination shall fully vest as of the Date of Termination;

 

  

  

  

 

	
  

	
(d)

	
All outstanding Stock Options , which would vest within one (1) year of the Date of Termination shall fully vest as of the Date of Termination;

	
  

	
(e)

	
any deferred compensation not yet paid to the Executive (including, without limitation, interest or other credits on such deferred amounts) to be paid at the time provided in the applicable deferred compensation plan and any accrued vacation pay;

	
  

	
(f)

	
reimbursement for expenses incurred but not yet paid prior to the Date of Termination;

	
  

	
(g)

	
aggregate annual premiums for insurance coverage for twenty-four (24) months after the Date of Termination, to be paid in a lump sum no later than seventy-five (75) days following the Date of Termination; and

 

	
  

	
(h)

	
health and welfare benefits, as provided to and under the same terms as other executives of the Corporation or subsidiary, for twenty-four (24) months after the Date of Termination and any other compensation or benefits which may be owed or provided to the Executive in accordance with the terms and provisions of any applicable agreements, plans and programs of or made by the Corporation and/or the Subsidiary.

	
6.4.

	
Termination Due to Retirement. The Executive may terminate his employment hereunder as a result of Retirement.   A "Retirement" shall mean any voluntary termination of employment upon prior written Notice of Termination to the Corporation in accordance with Section 1.8 by the Executive on his own initiative other than (a) a termination due to Disability or (b) a Termination for Good Reason.  Such written Notice of Termination given by the Executive for Retirement shall be given not less than one hundred fifty (150) business days prior to the Date of Termination if termination is effective before July 1, 2016, and not less than ninety (90) business days prior to the Date of Termination if termination is
effective on or after July 1, 2016.  For the avoidance of any doubt upon Date of Termination due  to Retirement, there shall be no accelerated vesting of equity awards and all awards that have not yet vested shall be forfeited.  A Retirement shall not be, nor shall it be deemed to be, a breach of this Agreement and in the event of a Retirement, the Executive shall be entitled to receive:

	
  

	
(a)

	
Base Salary at the rate in effect (as provided for by Section 5.1 of this Agreement) at the time of such termination through the Date of Termination payable in accordance with the Corporation’s standard payroll practices;

	
  

	
(b)

	
if and to the extent the applicable performance goals are achieved as determined in accordance with Section 5.2 of this Agreement, a prorated Annual Incentive Bonus in respect of the fiscal year in which the Date of Termination occurs, equal to what such Annual Incentive Bonus would have been for the full fiscal year multiplied by 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, payable at the same time such Annual Incentive Bonus would have been paid had the Executive not terminated employment;

 

	
  

	
(c)

	
any deferred compensation not yet paid to the Executive (including, without limitation, interest or other credits on such deferred amounts) to be paid at the time provided in the applicable deferred compensation plan and any accrued vacation pay;

	
  

	
(d)

	
reimbursement for expenses incurred but not yet paid prior to the Date of Termination;

	
  

	
(e)

	
aggregate annual premiums for insurance coverage through the Date of Termination in respect of the life and Disability insurance referred to in Section 5.6(a), to be paid in a lump sum no later than seventy-five (75) days following the Date of Termination;

 

  

  

  

 

	
  

	
(h)

	
any other compensation or benefits which may be owed or provided to the Executive in accordance with the terms and provisions of any applicable agreements, plans and programs of or made by the Corporation and/or the Subsidiary; and

	
  

	
(i)

	
health and welfare benefits, as provided to and under the same terms as other executives of the Corporation or Subsidiary, for twenty-four (24) months after the Date of Termination.

	
6.5

	
Termination by the Corporation on a Change in Control. The Corporation shall be permitted to terminate the Executive's employment hereunder  within two (2) years following a Change in Control but only in accordance with the Notice of Termination provisions of this Agreement. If the Corporation terminates the Executive's employment within two (2) years following the date of a  Change in Control, other than a Change in Control pursuant to Section 1.11(a) or (c) which was not consummated within twelve (12) months of said Change in Control, the Executive shall be entitled to receive:

 

	
  

	
 (a)

	
Base Salary at the rate in effect on the Date of Termination (as provided for by Section 5.1 of this Agreement)  and for twenty-four (24) months thereafter,  payable in accordance with the Corporation’s standard payroll practices commencing on the first payroll;

	
  

	
(b)

	
an aggregate amount not to exceed $2 million in the aggregate, but otherwise equal to the sum of the two largest Annual Incentive Bonuses or other cash bonuses previously received by Executive from the Corporation for any fiscal year commencing with the 2002 fiscal year whether when employed under this Agreement, when employed under any of the Prior Employment Agreements or when employed under any other arrangement with the Corporation to be paid in a lump sum no later than seventy-five (75) days following the Date of Termination;

 

	
  

	
(c)

	
any Restricted Stock Awards shall fully vest as of the Date of Termination;

 

	
  

	
(d)

	
any Stock Options shall fully vest on the Date of Termination;

	
  

	
(e)

	
any deferred compensation not yet paid to the Executive (including, without limitation, interest or other credits on such deferred amounts) to be paid at the time provided in the applicable deferred compensation plan and any accrued vacation pay;

	
  

	
(f)

	
reimbursement for expenses incurred but not yet paid prior to the Date of Termination;

	
  

	
(g)

	
aggregate annual premium for insurance coverage for twenty-four (24) months after the Date of Termination,, to be paid in a lump sum no later than seventy-five (75) days following the Date of Termination; and

 

	
  

	
(h)

	
health and welfare benefits, as provided to and under the same terms as other executives of the Corporation or subsidiary, for twenty-four (24) months after the Date of Termination and any other compensation or benefits which may be owed or provided to the Executive in accordance with the terms and provisions of any applicable agreements, plans and programs of or made by the Corporation and/or the Subsidiary.

 

	
6.6

	
Termination of Employment By Reason of Expiration or Non-Renewal of the Agreement.  Anything in this Agreement to the contrary notwithstanding, if the Executive’s  employment terminates by reason of a failure to extend the Term of Employment (regardless of whether such failure to extend occurs by reason of a notice from either the Executive or the Corporation that the Agreement will not be extended in accordance with Section  3.2 or by reason of a failure of the parties to further extend the Agreement following the end of the initial Term of Employment as set forth in Section 3.1), the Executive shall be treated as having terminated due to Retirement pursuant to Section 6.4 above.

	
6.7.

	
No Mitigation; No Offset. In the event of any termination of employment under this Section 6, the Executive shall be under no obligation to seek other employment and there shall be no offset against any amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that the Executive may obtain. Any amounts due under this Section 6 are in the nature of severance payments, or liquidated damages, or both, and are not in the nature of a penalty.

 

  

  

  

 

	
6.8. 

	
Payment.

	
  

	
(a)

	
Except as otherwise provided in this Agreement, and subject to Section 6.8(b) below, any payments to which the Executive shall be entitled under this Section 6 shall be made as follows:

	
  

	
(i)

	
Except with respect to continued payment of Base Salary in accordance with any provisions of this Agreement, and except with respect to payment of any Annual Incentive Bonus, payment shall be made as promptly as possible following the Date of Termination.  If the amount of any payment due to the Executive cannot be finally determined within seventy-five (75) days after the Date of Termination, such amount shall be estimated on a good faith basis by the Corporation and the estimated amount shall be paid no later than seventy-five (75) days after such Date of Termination.  As soon as practicable thereafter, the final determination of the amount due shall be made and any adjustment requiring a payment to or from the Executive shall be made as promptly as
practicable.

	
  

	
(b)

	
This Section 6.8 shall apply to all or any portion of any payment or benefit payable under this Agreement  that is considered nonqualified deferred compensation subject to Code Section 409A ("Section 409A Compensation")  Notwithstanding anything in the Agreement to the contrary, the following rules shall apply to any Section 409A Compensation in order to prevent any accelerated or additional tax under Code Section 409A:

	
  

	
(i)

	
If the termination of the Executive's employment does not qualify as a "separation from service" within the meaning of Treas. Reg. Section 1.409A­1(h) from the "Corporation's Controlled Group", then any Section 409A Compensation payable upon termination of employment will not commence until a "separation from service" occurs or, if earlier, the earliest other date as is permitted under Code Section 409A. For this purpose, the "Corporation's Controlled Group" means the Corporation and (A) any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes the Corporation and (B) any trade or business (whether or not incorporated) which is under common control (as defined in Code Section 414(c)) with the Corporation.

	
  

	
(ii)

	
If at the time of the Executive's separation from service, the Executive is a "specified employee" as defined in Code Section 409A, then the Corporation will defer the commencement of any Section 409A Compensation payable upon separation from service (without any reduction in such payments or benefits ultimately paid or provided to the Executive) until the date that is six (6) months following separation from service or, if earlier, the earliest other date as is permitted under Code Section 409A.

	
  

	
(iii)

	
This Agreement is intended to comply with, or be exempt from Code Section 409A and to the maximum extent permitted the Agreement shall be limited, construed and interpreted in accordance with such intent.

	
  

	
(iv)

	
To the extent that reimbursements or other in-kind benefits under this Agreement constitute nonqualified deferred compensation for purposes of Code Section 409A, (i) all reimbursement of expenses hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive, (ii) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

  

  

  

	
6.9 

	
Golden Parachute Excise Tax.

(a)           Affect on Payment.  Anything in this Agreement to the contrary notwithstanding, in the event that any amount or benefit paid, payable, or to be paid, or accelerated or distributed, distributable, or to be distributed to or with respect to the Executive by the Corporation, the Subsidiary or any other Affiliate, including Base Salary, Incentive Bonuses, Restricted Stock, Options and any other amounts payable in respect of this Agreement, the Prior Employment Agreements and any other agreement between the Executive and the Corporation, Subsidiary or Affiliate (collectively, the "Total  Payments"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the “Excise Tax”), then Executive shall receive the greater of the amount determined under (i) or (ii) below:

(i)           Except as otherwise provided in clause (ii) below, in the event that the Total Payments would exceed the maximum amount that could be paid to Employee without becoming subject to the Excise Tax, then notwithstanding anything in this Agreement to the contrary, the amount payable to Employee under Section 6 above  shall be reduced such that the value of the aggregate Total Payments that Employee is entitled to receive shall be one dollar ($1) less than such maximum amount (the “Reduced Amount”).

(ii)           In the event the Total Payments after payment of the Excise Tax would be greater than the Reduced Amount, Executive shall be entitled to receive an amount equal to the Total Payments and the provisions of clause (i) above shall not be applied.

(b)           Determination by Accounting Firm.  All determinations required to be made under this Section 6.9, shall be made by the Company’s independent auditors or such other certified public accounting firm reasonably acceptable to Executive as may be designated by the Corporation (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Corporation and Executive.

(c)           For the avoidance of doubt, in no event will the Corporation reimburse Executive for the Excise Tax, if any.

	
7. 

	
Non-Exclusivity of Rights.

 

Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any bonus or incentive plan or program provided or maintained by the Corporation, the Subsidiary or any other Affiliate and for which the Executive may qualify or be selected, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have under any other existing or future agreements with the Corporation, the Subsidiary or any Affiliate, including, without limitation, any change of control agreements or any stock option, restricted stock, or stock unit agreements, including the Restricted Stock Agreement and the Option Agreements. Except as otherwise expressly
provided for in this Agreement, amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plans or programs of the Corporation, the Subsidiary or any other Affiliate at or subsequent to the Date of Termination shall be payable in accordance with such plans or programs.

	
8. 

	
Full Settlement.

The Corporation's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without

limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against the Executive or others.

	
9. 

	
Costs of Enforcement.

The following provisions of this Section 9 shall apply if it becomes necessary or desirable for the Executive to retain legal counsel or incur other costs and expenses in connection with either enforcing any and all of his rights under this Agreement or defending against any allegations by the Corporation of breach of this Agreement by the Executive:

 

  

  

  

	
9.1.

	
The Executive shall be entitled to recover from the Corporation reasonable attorneys' fees, costs and expenses incurred by him in connection with such enforcement or defense for as long a period as necessary to enforce this Agreement, not to exceed thirty-six (36) months from the Executive’s Date of Termination.

 

	
9.2.

	
Payments required under this Section 9 shall be made by the Corporation to the Executive (or directly to the Executive's attorney) promptly following submission to the Corporation of appropriate documentation evidencing the incurrence of such attorneys' fees, costs, and expenses, but in no event later than the time required in Section 6.8(b)(iv) of this Agreement.

	
9.3.

	
The Executive shall be entitled to select his legal counsel; provided, however, that such right of selection shall not affect the requirement that any costs and expenses reimbursable under this Section 9 be reasonable.

 

	
9.4.

	
The Executive's rights to payments under this Section 9 shall not be affected by the final outcome of any dispute with the Corporation; provided, however, that to the extent that the court shall determine that under the circumstances recovery by the Executive of all or a part of any such fees and costs and expenses would be unjust or inappropriate, the Executive shall not be entitled to such recovery; and to the extent that such amounts have been recovered by the Executive previously, the Executive shall repay such amounts to the Corporation.

 

In addition, the Corporation will reimburse the Executive for the reasonable attorney fees incurred in connection with the preparation and negotiation of this Agreement, no later than the time required in Section 6.8(b)(iv) of this Agreement.

	
10. 

	
Confidential Information and Noncompetition.

	
10.1.

	
Confidential Information. The Executive shall not, during the Term of Employment and thereafter, without the prior express written consent of the Corporation or the Subsidiary, disclose any confidential information, knowledge or data relating to the Corporation, the Subsidiary or any other Affiliate and their respective businesses, which (a) was obtained by the Executive in the course of the Executive's employment with the Corporation, and (b) which is not information, knowledge or data otherwise in the public domain (other than by reason of a breach of this provision by the Executive), unless required to do so by a court of law or equity or by any governmental agency or other authority. In no event shall an asserted violation of
this Section 10.1 constitute a basis for delaying or withholding the payment of any amounts otherwise payable to the Executive under this Agreement.

 

	
10.2.

	
Noncompetition. If the Executive’s  employment is terminated hereunder: (i) by the Corporation “without” cause  or “for good reason” by the Executive pursuant to Section 6.3; (ii) following a Change in Control pursuant to Section 6.5 of this Agreement then this Section 10.2 shall apply in consideration of the termination payments due pursuant to Section 6.3 and 6.5 respectively.  If the Executive’s employment is terminated due  to Retirement pursuant to Section 6.4 of this Agreement, then the Corporation, by written notice given to the Executive within 30 days after the  delivery of a Notice of Termination in connection with such Termination may
require that this Noncompetition Section 10.2 apply.  If this Section 10.2 applies as set forth above, then the Executive, without the express written consent of the Corporation, shall not, for the twenty-four (24) month period following the Date of Termination, engage in any business, whether as an employee, consultant, partner, principal, agent, representative or stockholder (other than as a stockholder of less than a 5% equity interest) or in any other corporate or representative capacity, if it involves engaging in, or rendering services or advice pertaining to, any lines of business the Corporation or the Subsidiary was actively conducting on the Date of Termination. The obligation of the Executive to abide by the restrictions set forth in the preceding sentence shall be conditioned upon the Corporation, providing the entitlements set forth, as applicable in Section 6.3
and 6.5, and in the event of a termination due to Retirement continuing payment of the Executive's Base Salary for the 24-month period during which such restriction shall be in effect. Such Base Salary shall be paid at the rate in effect (as provided for in Section 5.1 of this Agreement) on the Date of Termination. If the Corporation shall institute any action or proceeding to enforce the provisions of this Section 10.2, or shall file any claim in any proceeding to enforce such provisions, the Executive hereby waives the claim or defense that the Corporation has an adequate remedy at law and waives the requirement that the Corporation post a bond in securing equitable relief, and the Executive shall not contend in any such action or proceeding the claim or defense that an adequate remedy at law exists.

  

  

  

 

	
11. 

	
Successors.

	
11.1.

	
The Executive. This Agreement is personal to the Executive and, without the prior express written consent of the Corporation, shall not be assignable by the Executive, except that the Executive's rights to receive any compensation or benefits under this Agreement may be transferred or disposed of pursuant to testamentary disposition, interstate succession or pursuant to a domestic relations order of a court of competent jurisdiction. This Agreement shall inure to the benefit of and be enforceable by the Executive's heirs, beneficiaries and/or legal representatives.

 

	
11.2.

	
The Corporation. This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors and assigns. The Corporation shall require any successor to all or substantially all of the business and/or assets of the Corporation or the Subsidiary, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, by an agreement in form and substance satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Corporation would be required to perform if no such succession had taken place.

	
12. 

	
Miscellaneous.

 

	
12.1.

	
Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, applied without reference to principles of conflict of laws. The Corporation and the Executive knowingly and voluntarily are  waiving any rights to a jury trial.

	
12.2.

	
Amendments. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.  Notwithstanding the foregoing, the Corporation and Subsidiary may unilaterally amend this Agreement without the consent of the Executive in order for the Corporation-sponsored and Subsidiary-sponsored group health plans to comply with Section 10101(d) of the Patient Protection and Affordable Care Act (relating the discrimination with respect to insured plans).

	
12.3.

	
Notices. 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:

Premium Point

New Rochelle, New York 10801

If to the Corporation:

c/o Ethan Allen Interiors Inc. Ethan Allen Drive

Danbury, Connecticut 06813

Attn: Chairman, Compensation Committee

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

 

  

  

  

	
12.4.

	
Withholding. The Corporation may withhold from any amounts payable under this Agreement such federal, state or local income taxes as shall be required to be withheld pursuant to any applicable law or regulation. If, at any time on or after the Commencement Date, the Executive will recognize taxable income with respect to the awards from the Corporation of Common Stock (regardless of when such awards are made), the Executive may elect to have the Corporation withhold from the shares to be delivered shares sufficient to satisfy all or a portion of such tax withholding requirements, unless prohibited by the terms of the applicable award agreement or the Stock Option Plan.

 

	
12.5.

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

 

	
12.6.

	
Captions. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

 

	
12.7.

	
Beneficiaries/References. The Executive shall be entitled to select (and change) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive's death, and may change such election, in either case by giving the Corporation written notice thereof.  In the event that Executive makes no beneficiary designation in accordance with the procedures described above, then the beneficiary shall be deemed to be Executive’s then current spouse if she is alive on the date of Executive’s death and if she is not still alive or if there is no spouse on such date,  Executive’s estate.  In the event of the Executive's death or a judicial determination
of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to other beneficiary(ies), estate or his legal representative(s).

	
12.8.

	
Entire Agreement.

	
  

	
 (a)

	
Upon the commencement of the Term of Employment, this Agreement will contain the entire agreement between the parties concerning the subject matter hereof and will supersede the Prior Employment Agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect to the subject matter hereof, excluding: (i) the Restated Director Indemnification Agreement by and between the Corporation and the Executive; (ii) the agreements governing the following awards associated with the Executive's employment by the Corporation that were granted to the Executive prior to Commencement Date: stock options (the "Prior Options"), restricted stock (the "Prior Restricted Stock"), and stock units (the "Prior Stock Units"), and (iii) any compensation and
other benefits remaining to be paid pursuant to the Prior Employment Agreements.

 

	
  

	
(b)

	
This Agreement shall not affect the Executive's rights to benefits accrued prior to October 1, 2011 and the Executive's rights with respect to Prior Options, Prior Restricted Stock, and Prior Stock Units shall be governed by the respective stock option, restricted stock, and stock unit agreements relating thereto. Notwithstanding the preceding sentence, (i) the Executive's rights with respect to the Prior Options, Prior Restricted Stock, and Prior Stock Units following the Executive's Date of Termination shall be governed by the provisions of Section 6 of this Agreement to the extent such provisions do not adversely affect the Executive's rights under those awards, and (ii) the expiration of the Agreement Term as defined in the 1997 Agreement, 2002 Agreement and 2007 Agreement shall not result
in vesting of any Prior Options, Prior Restricted Stock, or Prior Stock Units pursuant to the last paragraph of Section 6.3 of the 1997 Agreement, the 2002 Agreement and  the 2007 Agreement.

 

	
12.9.

	
Representation. The Corporation represents and warrants that it is fully authorized and empowered to enter into this Agreement and that the performance of its obligations under this Agreement will not violate any agreement between the Corporation and any other person or organization or any applicable laws or regulations.

	
12.10.

	
Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement or the Executive's employment hereunder to the extent necessary to the intended preservation of such rights and obligations.

 

  

  

  

 

	
12.11

	
Recoupment.  All amounts, payments, benefits, awards and other compensation to which the Executive is entitled under this Agreement and/or the Prior Employment Agreements are subject to recoupment or “clawback” in accordance with the Corporation’s recoupment policy as it may be adopted and amended from time to time.

 

	
12.12 

	
Counterparts; Electronic Signatures.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall constitute but one and the same instrument.  A facsimile or electronic signature shall be deemed an original signature.

 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and the Corporation has caused this Agreement to be executed in its name on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year first above written.

 

EXECUTIVE

 

/s/ M. Farooq Kathwari                                                      

ETHAN ALLEN INTERIORS, INC.

By:/s/ Kristin Gamble                                                      

Name: Kristin Gamble                                                      

Title: Chairperson, Compensation Committee

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