Document:

exhibit10_1.htm

 

Exhibit 10.1

 

CASH COLLATERAL PLAN

PLEDGE AND SECURITY AGREEMENT

FOR

GUARANTEE OF DEDUCTIBLE and / or LOSS LIMIT REIMBURSEMENT

This pledge and security agreement for guarantee of deductible and / or loss limit reimbursement, (" Agreement"), is made and entered into as of 12/15/2015 by and between Liberty Mutual, as defined in ¶ 1 below, and  Policyholder,  as defined in ¶ 2 below, to secure all of Policyholder's obligations to Liberty Mutual arising out of or in connection with any and all the following insurance policies including any and all renewals, rewrites thereof (singularly the "Insurance Policy" collectively the "Insurance Policies") listed below and any policies with deductible or loss limit provisions which are written by Liberty Mutual for Policyholder subsequent to the execution of this Agreement but prior to the renewal are incorporated herein by reference and made a part hereto.

 

Policy No.                                                      Insurer

 

See Attached Schedule                               Liberty Mutual

 

1.           Liberty Mutual. The term "Liberty Mutual" means Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance Company, Liberty Insurance Corporation, or The First Liberty Insurance Corporation, all of which have their principal place of business at 175 Berkeley Street, Boston, Massachusetts, 02116 and Employers Insurance of Wausau, Wausau General Insurance Company, Wausau Underwriters Insurance Company or Wausau Business Insurance Company, all of which have their principal place of business at 2000 Westwood Drive, Wausau, WI 54401, or any other executing company or companies of The Liberty Mutual Group or the Wausau Insurance Companies. However, regardless of which company has issued an Insurance Policy, this Agreement will be satisfied if all notices and payments are made to:

Liberty Mutual Insurance Company

175 Berkeley Street

Boston, Massachusetts   02116

Notices to Liberty Mutual shall be in writing and shall be delivered by mail to Liberty Mutual's principal place of business and addressed to Steve Whalen, H.O Financial Credit, or to such other address or person as Liberty Mutual may specify to the Policyholder in writing.  Notices given hereunder shall be deemed effective upon the date received.

 

 

Copyright, 2001, Liberty Mutual Insurance Company

  

2.           Policyholder.  The term "Policyholder" as used in this  Agreement shall mean ITT Educational Services Inc. with its principal place of business at 13000 North Meridian Street, Carmel, IN 46032 and shall include all those listed on any of the above Insurance Policies as a "named insured," and all of them shall be jointly and severally liable for performance of the terms of this Agreement and for the reimbursement of deductible and/ or loss limit advances made by Liberty Mutual, for the payment of premiums and for all other obligations owing to Liberty Mutual under the Insurance Policies or this Agreement.

Except for the deductible and / or loss limit reimbursement notices contemplated in ¶5(a) or premium invoices, any notice required to be sent to the Policyholder shall be in writing and shall be delivered by mail to the person designated below at Policyholder's principal place of business and addressed to Angela Knowlton, CPA, Senior Vice President, Controller and Treasurer, Chief Accounting Officer, or to such other address or person as Policyholder may specify to the Liberty Mutual in writing.  Notices given hereunder shall be deemed effective upon the date received.  Notices to the Policyholder shall be on behalf of all those listed as a "named insured" on any of the above Insurance Policies and Policyholder will act on behalf of all of them, unless the Policyholder and Liberty Mutual agree in writing on some other arrangement.

3.           Endorsements and Filings.  Liberty Mutual has issued or will issue to the Policyholder the above listed Insurance Policies and, with the consent of the Policyholder, has attached or will attach to some or all of the Insurance Policies certain deductible, premium endorsements and the MCS-90 endorsement if applicable.  Liberty Mutual has also filed, or will file, with appropriate federal and state regulatory agencies, where applicable, evidence of insurance for the protection of the public, and has issued or will issue evidence of insurance to additional parties who require or request such evidence of insurance.

4.           Deductible Advances and Premiums.  Pursuant to the terms of the Insurance Policies, Liberty Mutual may advance any part or all of the deductible and/ or loss limit amount or payments made pursuant to the terms of the MCS-90 endorsement on behalf of the Policyholder for claims which are the sole and exclusive liability of the Policyholder. The Policyholder agrees to reimburse Liberty Mutual for such payments, and any allocated loss adjustment expenses and costs applicable to such claims.

To the extent not reflected in the applicable rating plan(s), Policyholder shall reimburse Liberty Mutual for any taxes, interest, fines or penalties paid or advanced by Liberty Mutual which are attributable to any deductible amounts under the Insurance Policies and for any state assessments, surcharges or other charges paid or advanced by Liberty Mutual, including but not limited to those that relate to any second injury fund, guaranty fund, residual market, reinsurance pool, or other compulsory plan or mechanism and any interest, fines or penalty charges thereon.

All amounts due from the Policyholder pursuant to or described in this ¶4 are referred to herein as “Obligations”.  Any adjusted and other premiums that may become due from Policyholder pursuant to the terms of the Insurance Policies as well as any amount Liberty Mutual may advance pursuant to the terms of the MCS-90 endorsement on any other policy issued for Policyholder will also be considered “Obligations”.

 

  

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5.  

	
Reimbursement, Payment, and Disputed Deductible Amounts.

(a)           Reimbursement by the Policyholder of amounts paid or advanced by Liberty Mutual, under the circumstances described in ¶4 above, shall be made so that Liberty Mutual receives payment on or before the due date after receipt by the Policyholder of any written request by Liberty Mutual for reimbursement of said amounts. Payment by Policyholder of any adjusted or other premiums or amounts

due under the Insurance Policies shall be made so that Liberty Mutual receives payment on or before the due date after receipt by Policyholder of any written notice by Liberty Mutual to Policyholder that such a payment is required. Should any reimbursement, premium payment or amounts due not be made within said thirty (30) day period of the due date, then, in addition to all other rights and remedies available to Liberty Mutual hereunder, under the policies, or at law or in equity, Liberty Mutual shall be entitled to receive a late payment charge computed at a rate of Prime Rate (as published in the Wall Street Journal) plus 1% per annum on the overdue amount, for actual days elapsed from the date due until paid. Such late payment charges shall be included in "Obligations" as defined hereunder.

.

(b)           Should a dispute arise as to an amount due within the "Deductible and/ or Loss Limit Advance" based on the Policyholder's good faith belief that Liberty Mutual has, because of an administrative error, miscalculated the Deductible / or Loss Limit Advance, then the Policyholder, after written notice to Liberty Mutual indicating the nature and amount of the dispute, agrees to either:

(i)           Pay the Deductible and/ or Loss Limit Advance, including the disputed amount, however, if the disputed advance amount is resolved in the Policyholder's favor, Liberty Mutual shall credit the Policyholder such disputed advance plus accrued interest at the prevailing Prime Rate (as published in the Wall Street Journal) plus 1% per annum as of the original receipt date of the disputed advance amount to the date said amount is credited to the Policyholder; or

(ii)           Pay the Deductible and / or Loss Limit Advance as billed, net of the disputed amount, however, if the disputed advance amount is resolved in Liberty Mutual's favor, the Policyholder shall remit to Liberty Mutual such disputed advance amount plus accrued interest at the prevailing Prime Rate (as published in the Wall Street Journal) plus 1% per annum from the original due date of the disputed advance amount to date of remittance to Liberty Mutual.

6.           Collateral. To secure the Obligations, whether now existing or hereafter arising, of Policyholder to Liberty Mutual arising under or in connection with the Insurance Policies, this  Security Agreement and the MCS-90 endorsement if applicable, (the "Obligations"), Policyholder hereby pledges to and grants a security interest to Liberty Mutual in:

(a) all money and property of Policyholder which is now in or which shall hereafter come into the possession, custody or control of Liberty Mutual, including but not limited to cash in a bookkeeping account maintained by Liberty Mutual, (the "Cash Account"); in connection with the foregoing, Policyholder acknowledges and agrees that amounts credited to the Cash Account need not be segregated from other assets of Liberty Mutual and that no interest shall be paid or credited to the Policyholder on amounts credited to the Cash Account; and,

(b) all proceeds and products of ¶ 6(a).

(The property described in clauses (a) and (b) being hereinafter referred to as "Collateral").

7. Minimum Value of Collateral; Additional Collateral.  Policyholder will at all times maintain cash in the Cash Account equal to the amount set forth on the most recent schedule, ("Schedule"), provided by Liberty Mutual from time to time hereafter setting forth the estimated amount of deductible reimbursement,

adjusted or other premium, and other obligations ultimately owing from Policyholder to Liberty Mutual under the Insurance Policies and this Security Agreement with respect to the Potential Liability as defined in ¶ 8 below.  If the amount shown on the Schedule is greater than the amount in the Cash Account at the date of such Schedule, then Policyholder shall within thirty (30) days of its receipt of the Schedule, deposit additional cash into the Cash Account so that the amount in such Cash Account shall equal the amount set forth on such Schedule. If such determination indicates that the amount of Policyholder’s Potential Liability, as defined in ¶8, is less than the amount in the Cash Account at the date of such Schedule, the Policyholder upon receipt of written notice by Liberty Mutual may request that any excess cash be returned to the Policyholder.

 

 

  

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In the event that the Cash Account has been debited in accordance with the provisions of ¶ 11(a) below, then Policyholder shall, within fifteen (15) days of its receipt of the debit notice contemplated in ¶ 11(a), deposit additional cash in the amount of the Liquidated Amount, (as defined in ¶ 11(a)), into the Cash Account.  The Policyholder’s duty to maintain cash in the Cash Account, (or a letter of credit pursuant to ¶11 below), of a value not less than that required by this ¶ 7 shall continue until the Policyholder has paid or liquidated all of its Obligations.

8.           Potential Liability Defined. For purposes of this Security Agreement potential liability shall mean limited incurred losses developed using the then current National Market Actuarial development factors and practices subject to a deductible aggregate or maximum (if applicable) minus all losses previously reimbursed to Liberty Mutual by the Policyholder.

9.           Representations and Warranties of Policyholder. The Policyholder hereby represents and warrants as follows:

(a)           The Policyholder is, and at the time of delivery of the Collateral will be, the legal and beneficial owner of the Collateral free and clear of any and all liens, claims, encumbrances and interests other than the security interest created by this Security Agreement.

(b)           The Policyholder has full power, authority and legal right to pledge the Collateral pursuant to this Security Agreement.  The execution, delivery and performance of this Security Agreement by Policyholder has been authorized by all necessary corporate actions. The Policyholder executing this Security Agreement has full right and authority to execute and deliver this Security Agreement on behalf of all entities encompassed within the term "Policyholder."

(c)           No consent, authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required either (i) in connection with the pledge of Collateral by Policyholder pursuant to this Security Agreement or (ii) for the exercise by Liberty Mutual of its rights and remedies hereunder.

(d)           To the best of Policyholder's knowledge, there are no facts, events or occurrences which in any way impair the validity or collectability of the Collateral or which would tend to reduce the amount payable hereunder.

10.           Covenants of Policyholder.  In addition to the Obligations of Policyholder set forth in other provisions of this Security Agreement, Policyholder covenants and agrees that so long as any Obligations are outstanding, it will:

  

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(a)           Promptly execute and deliver all further instruments and documents and take all further action as may be necessary or as Liberty Mutual may reasonably request in order to perfect and protect any security interest granted hereby or to enable Liberty Mutual to exercise and enforce its rights and remedies hereunder.

(b)           Mark its books and records pertaining to the Collateral to evidence this Security Agreement and the security interest granted hereby;

(c)           Not create, permit or suffer to exist any lien, claim, encumbrance or interest in all or any part of the Collateral other than the security interest created by this Security Agreement;

(d)           Not assign, exchange, transfer, all or any portion of the Collateral or attempt or contract to do so; and,

(e)           Advise Liberty Mutual promptly in reasonable detail (i) of any lien, security interest, encumbrance or claim made or asserted against any portion of the Collateral and (ii) of the occurrence of any other event which would have a material effect on the aggregate value of the Collateral or on the security interest created hereunder.

Limitation on Liberty Mutual's Duty with Respect to Collateral.

(a)           Liberty Mutual shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession or under its control if the Collateral is accorded treatment substantially equivalent to that which Liberty Mutual in its individual capacity accords its own property consisting of cash, it being understood, however that Liberty Mutual shall not have responsibility for taking any necessary steps (other than steps taken in accordance with the standard of care set forth above) to maintain possession of the Collateral or to preserve rights against any person with respect to the Collateral.

(b)           Liberty Mutual shall be under no duty or obligation (i) to make or give presentment, demand for performance, notice of non-performance, protest, notice of protest, or notice of dishonor in connection with any obligations or evidences of indebtedness held as Collateral or in connection with any obligations or evidences of indebtedness which constitute the Obligations.

11.           Defaults & Remedies.  Any of the following events shall be "Events of Default":

(a) The failure of Policyholder to pay or reimburse any of the Obligations when due. If an Event of Default described in ¶ 11(a) has occurred, Liberty Mutual may debit the Cash Account for the applicable past due Obligation and related late payment charge, (the "Liquidated Amount").  After Liberty Mutual's receipt and application of the Liquidated Amount, Liberty Mutual shall give written notice to Policyholder of the Liquidated Amount, the date of debit, and the reimbursement request to which the Liquidated Amount related. Policyholder acknowledges and agrees that debits in accordance with this ¶ 11(a) do not constitute foreclosure or sale of the Collateral, but rather constitute an additional remedy available to Liberty Mutual in its sole and absolute discretion upon the occurrence of an Event of Default described in ¶ 11(a), above, and that any Collateral remaining after any such debit shall continue to be Collateral securing all present and future Obligations.;

(b) The failure of Policyholder to maintain sufficient cash in the Cash Account, as the case may be, as set forth in ¶ 7. above;

  

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(c) The insolvency of the Policyholder, commencement by Policyholder of corporate or other liquidation or dissolution proceedings, failure by Policyholder to pay debts generally as they become due, general assignment by the Policyholder for the benefit of creditors, or the filing by or against Policyholder of any petition, proceeding, case or action under the provisions of the United States Bankruptcy Code or other law for the relief of or relating to debtors;

(d) The filing of a petition for the appointment of, or the appointment of, either voluntarily or involuntarily, a receiver, liquidator, conservator, rehabilitator, trustee, custodian or similar official to take possession or control of any property of Policyholder;

	
(e)  

	
Failure to keep or perform any of the terms or provisions of this Security Agreement;

If an Event of Default described in ¶11(b, c, d or e), above, has occurred, in addition to all other rights and remedies available under this Security Agreement, Liberty Mutual shall have the option to require the Policyholder to pay immediately upon notice any and all outstanding Obligations, including, but not limited to,  deductible / loss limit reimbursements, premium payments and all other obligations arising under or in connection with the Insurance Policies and this Security Agreement.

If any Event of Default, as described in ¶11(b, c, d or e), above,, has occurred, Liberty Mutual may do one or more of the following, in such order as Liberty Mutual shall determine in its sole and absolute discretion:

(i) terminate any services it performs for Policyholder and terminate any insurance (including the Insurance Policies) issued for the benefit of Policyholder (where permitted by law);

(ii)  exercise with respect to the Collateral, in addition to all other rights and remedies provided for in this Security Agreement or otherwise available to it at law or in equity, all rights and remedies of a secured party on default under the Uniform Commercial Code then in effect the Commonwealth of Massachusetts.

(f) The cancellation or non renewal of any of the Insurance Policies to which this Security Agreement applies;

	
(g)  

	
The violation of any or all of the following covenants:

[Not Applicable]

If an Event of Default, as defined in ¶ 11(f or g) the Policyholder will first have the option of providing a letter of credit within 30 days pursuant to the terms outlined below.

If the Policyholder fails to deliver to Liberty Mutual the Letter of Credit then Liberty Mutual may do one or more of the following, in such order as Liberty Mutual shall determine in its sole and absolute discretion:

  

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(i) terminate any services it performs for Policyholder and terminate any insurance (including the Insurance Policies) issued for the benefit of Policyholder (where permitted by law);

(ii)  exercise with respect to the Collateral, in addition to all other rights and remedies provided for in this Security Agreement or otherwise available to it at law or in equity, all rights and remedies of a secured party on default under the Uniform Commercial Code then in effect the Commonwealth of Massachusetts.

If an Event of Default, as defined in ¶ 11(b through g) above occurs;

Liberty Mutual may, in its sole and absolute discretion, and without waiving any other rights or remedies available under this Security Agreement or available to a secured party under the Uniform Commercial Code, agree to waive the specific Event of Default provided that the Policyholder shall first deliver to Liberty Mutual, within thirty (30) days of the Event of Default, a clean, irrevocable letter of credit providing for negotiation credit, (multiple partial draws permitted), by sight draft without notation in substantially similar form to the specimen to be provided by Liberty Mutual.  Upon receipt of said letter of credit, Liberty Mutual shall remit to Policyholder the balance of the amounts credited in the Cash Account after deduction of any outstanding unpaid Obligations under this Security Agreement.  So long as a letter or letters of credit satisfying the requirements of this ¶ 11 are maintained, the requirements of ¶6 and ¶ 7, above, shall be suspended.

 

 

The Letter of Credit shall name Liberty Mutual as the beneficiary, contain an evergreen clause, and be issued for a term of at least 12 months by a bank which is, and shall continue to be “satisfactory” to Liberty Mutual. To be “satisfactory” for the purposes of this Agreement a bank must be: (i) rated “C” or better by Kroll Bond Rating Agency, Inc. and any successors (“Kroll rating”); (ii) approved by the National Association of Insurance Commissioners; and, (iii) otherwise acceptable to Liberty Mutual in its sole and unreviewable discretion.  The amount of the letter of credit shall be the amount required by the most recent Schedule with respect to the Potential Liability as defined in ¶ 8 above reflecting estimated amounts of unpaid claims which are the responsibility of the Policyholder because of the deductible and/ or loss limit amount set forth in the deductible and / or premium endorsement(s).

If at any time the bank issuing a Letter of Credit ceases to be “satisfactory” in Liberty Mutual’s sole and unreviewable discretion, Policyholder shall have 90 days from the date it receives written notice from Liberty Mutual that the bank issuing the Letter of Credit no longer satisfies the requirements of this Agreement to provide Liberty Mutual with a replacement Letter of Credit which fully complies with the requirements of this ¶6 or another form of security acceptable to Liberty Mutual. If the Kroll rating of a bank is currently rated below “C” or subsequently drops below “C”, Liberty Mutual may defer requiring that some or all letters of credit provided by such bank be replaced if in Liberty Mutual’s sole and unreviewable discretion the financial health of the bank is such that the retention of one or more such Letters of Credit does not currently pose an unacceptable financial risk to Liberty Mutual.

If the amount set forth on any subsequent Schedule is greater than the amount of the then existing letter of credit, Policyholder shall deliver within thirty (30) days of receipt of written notice by Liberty Mutual, an amendment to the existing letter of credit or an additional letter of credit (which shall otherwise conform with the requirements of this paragraph) so that the total amount of such letter(s) of credit equals the amount set forth on the most recent Schedule. If such determination indicates that the amount of Policyholder’s potential liability, as defined in ¶8, is less than the amount of the existing Letter(s) of Credit, the Policyholder upon receipt of written notice by Liberty Mutual may reduce the Letter(s) of Credit by amendment so that the total amount of such Letter(s) of Credit) equals the amount set forth on the most recent Schedule.

  

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No later than 30 days before the date of termination of any such letter of credit, the Policyholder shall deliver to Liberty Mutual a substitute letter of credit which fully complies with the requirements specified above.  The substitute letter of credit shall take effect no later than the date of termination of the expiring letter of credit.  Policyholders' duty to deliver such a substitute letter of credit shall continue until Policyholder has paid or liquidated all of its Obligations pursuant to the Insurance Policies and this Security Agreement.

Liberty Mutual agrees to draw upon any such letter of credit only if the Policyholder fails to reimburse Liberty Mutual as provided in ¶ 5, except that, in the event that the Policyholder either: (i) fails to deliver an amended or additional letter of credit as specified above; (ii) fails to deliver a substitute letter of credit as specified above; (iii) fails to deliver a replacement letter of credit as specified above, then Liberty Mutual may draw upon the full amount of the letter of credit.

12. Additional General Terms & Provisions.   See Attached Appendix A which is incorporated herein by reference and made a part hereof.

IN WITNESS WHEREOF, Policyholder has executed and delivered this Agreement as of the date first set forth above.

ITT Educational Services, Inc.

By: /s/ Kevin M. Modany

Its: CEO

Accepted by Liberty Mutual as of the date first set forth above.

LIBERTY MUTUAL INSURANCE COMPANY

	
 

By:

	
 

/s/ Candice Gaeta

	
Its:

	
AUTHORIZED AGENT                                           

 

 

  

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APPENDIX A

ADDITIONAL GENERAL TERMS & PROVISIONS

Expenses. The Policyholder will pay to Liberty Mutual upon demand, any and all reasonable expenses, including, without limitation, reasonable legal fees and expenses, and the fees and expenses of any experts and agents, which Liberty Mutual may incur in connection with (a) the exercise or enforcement of any of the rights or remedies of Liberty Mutual hereunder, and/or (b) the failure by Policyholder to perform or observe any of the provisions hereof. The payment of such expenses shall be Obligations hereunder.

No Waiver; Cumulative Remedies; Amendment.  No failure on the part of Liberty Mutual to exercise nor any delay in exercising any right, power or remedy hereunder shall operate as a waiver hereof.  No single or partial exercise by Liberty Mutual of any right, power, or remedy hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power, or remedy hereunder.  Liberty Mutual shall not be deemed to have waived any of its rights or remedies hereunder by any act, delay, omission or otherwise or by any course of dealing and no waiver shall be valid unless in writing, signed by Liberty Mutual and then, only to the extent set forth therein. The remedies provided herein are cumulative and not exclusive. None of the provisions of this Security Agreement may be waived, altered, modified or amended other than by an instrument in writing signed by Liberty Mutual and the Policyholder.

Termination. This Security Agreement shall continue in full force and effect until the Policyholder has no further Obligations to Liberty Mutual hereunder and under any and all policies of insurance subject to this security agreement issued by Liberty Mutual.

Rights and Interests Absolute. Rights and Interests Absolute.  All rights of Liberty Mutual hereunder shall be absolute and unconditional irrespective of: (a) any changes in the time, manner or place of payment or in any other term of any of the Obligations or any other amendment or waiver of or any consent to any departure from the Obligations; (b) any release, amendment, waiver, or consent to any departure from any guaranty for any of the Obligations; or, (c) any other circumstances which might constitute a release or discharge of any Policyholder.

Policyholder waives any right to require Liberty Mutual to: (i) proceed against any person, including without limitation any other "named insured" or (ii) pursue any other remedy in Liberty Mutual's power; and, Policyholder further waives any defense arising by reason of any disability of any "named insured".   Policyholder hereby expressly waives all rights at law or in equity to argue as a defense to Liberty Mutual's rights to draw against the “Cash Account” under this Security Agreement, Policyholder's rights to subrogation, reimbursement, exoneration, contribution, and/or to set-off.

Successors and Assigns.  This Security Agreement shall be binding upon and inure to the benefit of all of the parties' respective successors and assigns; notwithstanding the foregoing, however, Policyholder may not assign its interests or delegate its duties hereunder without Liberty Mutual's prior written consent, in its sole and absolute discretion, and any prohibited assignment or delegation shall be void. No consent to an assignment or delegation by Liberty Mutual shall release Policyholder of any present or future Obligations to Liberty Mutual.

  

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Rules of Construction. Neither this  Security Agreement nor any uncertainty or ambiguity herein shall be automatically construed or resolved against Policyholder or Liberty Mutual, whether under any general rule of construction or otherwise; to the contrary, this  Security Agreement has been reviewed by all parties and their respective legal counsel and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of the parties hereto, to wit, enforcing the Obligations owing by Policyholder to Liberty Mutual. Titles and headings are for the convenience of the reader only, and shall have no substantive or interpretative force or effect whatsoever.

Merger and Integration; Severability. This  Security Agreement and all executed documents delivered pursuant hereto constitute the entire understanding and contract between the parties hereto pertaining to the subject matter hereof, and supersede any and all prior oral or written representations or communications with respect to the subject matter hereof, all of which communications are merged herein.  This Security Agreement may be executed in one or more counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.

Waiver of Trial by Jury.   Policyholder and Liberty Mutual hereby waive any right to a trial by jury in any action or proceeding to enforce or defend any rights under this Security Agreement or under any agreement, instrument or document delivered, or which may in the future be delivered, in connection herewith and agree that any such action or proceeding shall be tried before a court and not before a jury.

Counterparts; Electronic and Facsimile.  This Agreement may be signed in any number of counterparts, each of which shall be deemed an original for all purposes, but all of which shall constitute one and the same instrument.  This Agreement may be delivered electronically or by facsimile and an electronic or facsimile version of this Agreement shall be binding as an original.

Governing Law.  This Security Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

  

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[Missing Graphic Reference]

ITT Educational Services Inc.

CASH SECURITY SCHEDULE

 

 

	
EFFECTIVE

DATE

	
CASH COLLATERAL AMOUNT

	
12/15/2015

	
$2,187,000.00

 

THIS SCHEDULE REMAINS IN EFFECT UNTIL SUPERSEDED BY A REPLACEMENT SCHEDULE

  

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ITT EDUCATIONAL SERVICES, INC.

POLICY NUMBER

LISTING

WA7-64D-434763-014

WA7-64D-434763-013

WA7-64D-434763-012

WA7-64D-434763-011

WA7-64D-434763-010

WA7-64D-434763-019

WA7-64D-434763-018

WA7-14D-434763-017

WA7-14D-434763-016

WA7-14D-434763-015

WA7-14D-434763-014

WA7-14D-434763-013

WC7-641-434763-024

WC7-641-434763-023

WC7-641-434763-022

WC7-641-434763-021

WC7-641-434763-020

WC7-641-434763-029

WC2-641-434763-028

WC2-141-434763-027

WC2-141-434763-026

WC2-141-434763-025

WC2-141-434763-024

  

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WC2-141-434763-023

TB2-641-434763-054

TB2-641-434763-034

TB2-641-434763-053

TB2-641-434763-033

TB2-641-434763-052

TB2-641-434763-032

TB2-641-434763-051

TB2-641-434763-031

TB2-641-434763-050

TB2-641-434763-030

TB2-641-434763-059

TB2-641-434763-039

TB2-641-434763-038

TB2-141-434763-037

TB2-141-434763-036

TB2-141-434763-035

TB2-141-434763-034

TB2-141-434763-033

 

  

-13-lov-ex101_6.htm

 

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”) is made and entered into as of December 28, 2015, with an effective date as of January 1, 2016 (the “Effective Date”) by and between Spark Networks, Inc., a Delaware corporation (the “Company”), and Michael Egan, an individual resident in California (“Executive”). 

WITNESSETH:

WHEREAS, the Company and Executive entered into an Employment Agreement on December 15, 2014, which became effective January 2, 2015 and continues through December 31, 2015; and 

WHEREAS, the Company desires to retain Executive as Chief Executive Officer of the Company as of the Effective Date and Executive so desires to be retained. 

NOW THEREFORE, in consideration of the mutual obligations herein contained, the parties hereto, intending to be legally bound hereby, covenant and agree as follows: 

1.EMPLOYMENT 

(a)The Company hereby employs Executive as of the Effective Date to render services to the Company in the position of Chief Executive Officer.  Executive shall perform such duties commensurate with his position, subject to the control of the Board of Directors of the Company (the “Board”), for the overall strategic direction and leadership of the Company.  Executive shall report to the Board.

(b)As of the Effective Date, the Board shall appoint the Executive as a member of the Board to serve as a director.  Executive’s failure to be re-elected to the Board shall not constitute a termination of this Agreement, nor shall any such event entitle the Executive to any severance benefits.  Pursuant to the Company’s policies, for the duration of this Agreement, the Executive shall fulfill his duties as a director to the Company and as an officer or director to any affiliate thereof without compensation.  This Agreement shall not in any way be construed or interpreted so as to affect adversely or otherwise impair the right of the Company or the stockholders to remove the Executive from the Board at any time in accordance with the provisions of applicable law.  Executive shall execute the Board Resignation Agreement (Exhibit A) as a condition to his appointment to the Board.

(c)Throughout the Term (as defined below), Executive shall devote his full business time and undivided attention to the business and affairs of the Company and its affiliates and subsidiaries, except for reasonable vacations and except for illness or incapacity, but nothing in the Agreement shall preclude Executive from engaging in charitable and public service activities provided such activities do not materially interfere with the performance of his duties and responsibilities under this Agreement. 

2.TERM 

This Agreement shall commence on the Effective Date, and, unless terminated earlier pursuant to Section 4 hereof, shall run for a period of twelve months from the Effective Date (the “Initial Term”), subject to the terms and conditions herein set forth.  Following the Initial Term, this Agreement shall automatically renew on the first day of the following calendar year (the “Renewal Date”), and renew annually on the Renewal Date, but is terminable for any or no reason by either the Company or the Executive with sixty (60) days advance written notice (“Notice of Nonrenewal”) before the Renewal Date.  The entire term of this Agreement shall be the “Term.” 

3.COMPENSATION 

For services rendered by Executive during the Term of this Agreement, and for his performance of all additional obligations of employment, the Company agrees to pay Executive and Executive agrees to accept the following salary, other compensation, and benefits: 

1

 

(a)Base Salary.  During the Term, the Company shall pay Executive a base salary (the “Base Salary”) at the annual rate of $315,000 to be paid evenly over the course of the year in accordance with the Company’s standard payroll policies.  During the Term, the Base Salary may be increased but not decreased. 

(b) Short-Term Annual Incentive.  In addition to the Base Salary, Executive shall be eligible to receive a short-term annual incentive (“STI”) based upon specific operational goals to be determined by the Compensation Committee of the Board.  These operational goals will be set no later than 60 days following the beginning of the calendar year.  Executive’s target STI for 2016 will be $150,000.  In the event of termination by the Company for Cause (as defined in Section 4(g)) or by Executive without Good Reason (as defined in Section 4(g)), Executive will not be eligible for any STI payment.  For all other terminations, payment of any STI will be made at the discretion of the Compensation Committee.  STI payments for 2017 and thereafter are not covered by this Agreement, and remain subject to future determination by the Compensation Committee.  

(c)Economic Performance Incentive.  Based upon Executive’s satisfaction of goals as determined by the Compensation Committee, Executive shall be granted restricted stock units (“RSUs”) in the Company under the Company’s 2007 Omnibus Incentive Plan (the “Plan”) and subject to Award Agreement(s) under the Plan or under subsequent plan if one should be created by the Board.  Such goals shall be established annually by the Compensation Committee related both to (1) revenue levels and (2) EBITDA levels.  The goals will be set no later than 60 days following the beginning of the calendar year.  Except as otherwise provided herein, Executive shall be required to be employed on the date of grant of such RSUs and have satisfied both clauses (1) and (2) to be eligible for a grant of RSUs.  For 2016, the tiers for the number of RSUs for which Executive may be eligible are as follows:

(i)Base: 30,000 RSUs

(ii)Goal: 60,000 RSUs

(iii)Stretch: 100,000 RSUs

Any such grant of RSUs shall vest on the one year anniversary following the close of the 2016 fiscal year (December 31, 2017).  In the event of termination of employment by the Company without Cause (as defined in Section 4(g)) or by Executive for any reason any granted but unvested RSUs will continue to vest according to schedule.  In the event of termination by the Company for Cause (as defined in Section 4(g)), any granted but unvested RSUs shall be forfeited.  RSUs for the 2017 fiscal year, or any year thereafter, are not covered by this Agreement, and remain subject to future determination by the Compensation Committee. 

Benefits.  Executive shall be entitled to participate, as long as he is an employee of the Company, in any and all of the Company’s present or future employee benefit plans, including without limitation pension plans, thrift and savings plans, insurance plans, and other benefits that are generally applicable to the Company’s executives; provided, however, that the accrual and/or receipt by Executive of benefits under and pursuant to any such present or future employee benefit plan shall be determined by the provisions of such plan. 

(d)Business Expenses.  Executive shall be reimbursed for all reasonable expenses incurred in connection with the conduct of the Company’s business upon presentation of evidence of such expenditures, including but not limited to travel expenses incurred by Executive in the performance of his duties and professional organization dues. 

4.TERMINATION OF EMPLOYMENT.  Subject to the terms and conditions of this Section 4, either the Company or Executive may terminate Executive’s employment at any time, with or without Cause (as defined in Section 4(g)), during the Term.  Any termination of Executive’s employment during the Term shall be communicated by written notice of termination from the terminating party to the other party (“Notice of Termination”).  The Notice of Termination shall indicate the specific provision(s) of this Agreement relied upon in effecting the termination and a written statement of the reason(s) for the termination.  A Notice of Termination provided by either party shall not be effective for a period of thirty (30) days after receipt of such Notice of Termination by the other party.  In the event the Executive’s employment terminates under Subsection 4(a) (Severance upon Involuntary Termination without Cause and Termination by Executive with Good Reason), Subsection 4(b) (Severance upon Change in Control), Subsection 

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4(c) (Effect of Death or Disability) or Executive is terminated by Company for Cause, the Company shall pay to Executive upon Executive’s termination of employment: (i) the prorated Base Salary earned as of the date of Executive’s termination of employment, plus (ii) the accrued but unused vacation as of the date of Executive’s termination of employment, plus (iii) an STI payment in the discretion of the Compensation Committee.  Any unvested equity interests held by Executive shall be forfeited upon the employment termination date, except as otherwise provided herein.  Except as otherwise provided in this Section 4 or in any other agreement between the Company and Executive, the Company shall have no further obligation to make or provide to Executive, and Executive shall have no further right to receive or obtain from the Company, any payments or benefits in respect of the termination of Executive’s employment with the Company during the Term of Employment.  

(a)Severance upon Involuntary Termination without Cause and Termination by Executive with Good Reason.  In addition to any payments set forth above, in the event that the Company causes to occur an involuntary termination without Cause (as defined in Section 4(g)) or in the event that Executive resigns from employment with the Company for Good Reason (as defined in Section 4(g)) during the Term, Executive shall be entitled to a “Severance Package” that consists of the following: (i) a “Severance Payment” equal to 50% of Executive’s Base Salary paid in equal installments on the Company’s normal payroll dates for a period of six (6) months beginning with the payroll date following the sixtieth (60th) day following such termination, (ii) reimbursement of any COBRA payments paid by Executive in the twelve (12) month period following Executive’s termination of employment, and (iii), a pro-rata granting of RSUs based on the number of days worked during the period of employment and on the Compensation Committee’s good faith evaluation of Executive’s performance.  The amount of EPI payment will be determined after the books and records for the respective period have been closed, and the Compensation Committee determines the tier for which Executive is eligible, adjusted pro rata based on the number of days worked for the respective period.  If any plan pursuant to which severance welfare benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A under Treasury Regulation Section 1.409A-1(a)(5) or the Company is otherwise unable to continue to cover Executive under its group health plans without substantial adverse tax consequences, then an amount equal to each remaining premium payment shall thereafter be paid to Executive as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof).  Executive’s eligibility for any Severance Package will be conditional on Executive executing a Separation Agreement that includes a general mutual release by the Company and Executive in favor of the other and their successors, affiliates and estates to the fullest extent permitted by law, drafted by and in a form reasonably satisfactory to the Company and Executive, and Executive not revoking the mutual general release within any legally required revocation period, if applicable, within the fifty-two (52)-day period following termination.  All legally required and authorized deductions and tax withholdings shall be made from the Severance Payment, including for wage garnishments, if applicable, to the extent required or permitted by law.  Effective immediately upon termination of employment, Executive shall no longer be eligible to contribute to or to receive additional Company contributions as an active participant in any retirement or benefit plan covering employees of the Company, but shall continue to have all rights under each such plan that are afforded to terminated employees and inactive participants.

(b)Severance upon Change in Control.  In addition to any payments set forth above in Section 4 (but not Section 4(a)), in the event of a Change in Control (as defined below), and following the Change in Control, Executive resigns for any of the three following reasons: (i) Executive’s Base Salary is reduced by the Company; (ii) a reduction in Executive’s title, or a material reduction in Executive’s duties, authorities, and/or responsibilities; or (iii) a requirement by the Company, without Executive’s consent, that Executive relocate to a location greater than thirty-five (35) miles from Executive’s place of residence, then Executive shall be entitled to a “Severance Package” that consists of the following: (i) a “Severance Payment” equal to 100% of Executive’s Base Salary, paid in equal installments on the Company’s normal payroll dates for a period of one (1) year beginning with the payroll date following the sixtieth (60th) day following such termination, and (ii) reimbursement of any COBRA payments paid by Executive in the twelve (12) month period following Executive’s termination of employment.  If any plan pursuant to which severance welfare benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A under Treasury Regulation Section 1.409A-1(a)(5) or the Company is otherwise unable to continue to cover Executive under its group health plans without substantial adverse tax consequences, then an amount equal to each remaining premium payment shall thereafter be paid to Executive as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof).  Executive’s eligibility for any Severance Package will be conditional on Executive executing a Separation Agreement that includes a general mutual release by the Company and Executive in favor of 

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the other and their successors, affiliates and estates to the fullest extent permitted by law, drafted by and in a form reasonably satisfactory to the Company and Executive, and Executive not revoking the mutual general release within any legally required revocation period, if applicable, within the fifty-two (52)-day period following termination.  All legally required and authorized deductions and tax withholdings shall be made from the Severance Payment, including for wage garnishments, if applicable, to the extent required or permitted by law.  Effective immediately upon termination of employment, Executive shall no longer be eligible to contribute to or to receive additional Company contributions as an active participant in any retirement or benefit plan covering employees of the Company, but shall continue to have all rights under each such plan that are afforded to terminated employees and inactive participants. 

(c)Effect of Death or Disability.  In the event that Executive dies or terminates employment by reason of a Disability (as defined in Section 4(g)) during the Term of Employment, Executive shall be entitled to (i) payment of the unpaid prorated Base Salary earned as of the date of Executive’s death or Disability (the “Measurement Date”), and (ii) reimbursement of any COBRA payments paid by Executive or his estate or beneficiaries in the twelve (12) month period following the Measurement Date; provided, however, that if any plan pursuant to which severance welfare benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A under Treasury Regulation Section 1.409A-1(a)(5) or the Company is otherwise unable to continue to cover Executive under its group health plans without substantial adverse tax consequences, then an amount equal to each remaining premium payment shall thereafter be paid to Executive or his estate or beneficiaries as currently taxable compensation in substantially equal monthly installments over the continuation coverage period (or the remaining portion thereof).  All legally required and authorized deductions and tax withholdings shall be made from the payments described in the previous sentence, including for wage garnishments, if applicable, to the extent required or permitted by law.  Payment under this Section 4(c) shall be made not more than once, if at all.  In addition, Executive or Executive’s estate shall have such rights with respect to Executive’s Membership Units as provided for in the Operating Agreement. 

(d)Statement Regarding Termination of Employment.  In the event Executive’s employment is terminated without Cause, or Executive resigns for Good Reason, Executive and the Company will negotiate in good faith to reach an agreement on a statement reflecting a benign reason for termination or resignation.

(e)Ineligibility for Severance.  Notwithstanding anything to the contrary in this Agreement, Executive shall not be entitled to any Severance Package under this Agreement if at any time during the Term of Employment,  (a) Executive voluntarily resigns or otherwise terminates employment with the Company other than for Good Reason, or (b) the Company properly terminates Executive’s employment with Cause.  Effective immediately upon termination of employment, Executive shall no longer be eligible to contribute to or to be an active participant in any retirement or benefit plan covering employees of the Company. 

(f)Taxes and Withholdings.  The Company may withhold from any amounts payable under this Agreement, including any benefits or Severance Payment, such federal, state or local taxes as may be required to be withheld pursuant to applicable law or regulations, which amounts shall be deemed to have been paid to Executive.

(g)Definitions. 

(i)“Cause” shall mean the occurrence during the Term of any of the following: (i) formal admission to (including a plea of guilty or nolo contendere to), or conviction of a felony, or any criminal offense involving Executive’s moral turpitude under any applicable law, (ii) gross negligence or willful misconduct by Executive in the performance of Executive’s material duties required by this Agreement and such negligence or misconduct has been communicated to Executive in the form of a written notice from the Board, and that Executive has not substantially cured within thirty (30) days following receipt by Executive of such written notice; or (iii) material breach of this Agreement by Executive which breach has been communicated to Executive in the form of a written notice from the Board, and that Executive has not substantially cured within thirty (30) days following receipt by Executive of such written notice.

(ii)“Disability” shall mean, to the extent consistent with applicable federal and state law (including, without limitation Section 409A), Executive’s inability by reason of physical or mental illness to fulfill his obligations hereunder for ninety (90) consecutive days or for a total of one hundred and eighty (180) days in any twelve (12) month period which, in the reasonable opinion of an independent physician selected by the Company or its 

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insurers and reasonably acceptable to Executive or Executive’s legal representative, renders Executive unable to perform the essential functions of his job, even after reasonable accommodations are made by the Company.  The Company is not, however, required to make unreasonable accommodations for Executive or accommodations that would create an undue hardship on the Company.  

(iii)“Good Reason” shall mean the occurrence during the Term of Employment of any of the following: (i) a material breach of this Agreement by the Company which is not cured by the Company within thirty (30) days following the Company’s receipt of written notice by Executive to the Company describing such alleged breach; (ii) Executive’s Base Salary is reduced by the Company; (iii) a reduction in Executive’s title, or a material reduction in Executive’s duties, authorities, and/or responsibilities; or (iv) a requirement by the Company, without Executive’s consent, that Executive relocate to a location greater than thirty-five (35) miles from Executive’s place of residence.  Notwithstanding the above, the occurrence of any of the events described in the foregoing sentence shall not constitute Good Reason unless Executive gives the Company written notice, within thirty (30) calendar days after Executive has knowledge of the occurrence of any of the events described in the foregoing sentence, that such circumstances constitute Good Reason and the Company thereafter fails to cure such circumstances within thirty (30) days after receipt of such notice, and Executive terminates his employment hereunder within ninety (90) days after such event occurs.

(iv)“Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, (“Code”) and all applicable guidance promulgated thereunder. 

(h)Nonduplication of Benefits.  Notwithstanding any provision in this Agreement or in any other Company benefit plan or compensatory arrangement to the contrary, (i) any payments due under either Section 4(a), Section 4(b), or Section 4(c) shall be made not more than once, if at all, (ii) payments may be due under either Section 4(a), Section 4(b), or Section 4(c), but under no circumstances shall payments be made under more than one of the following: Section 4(a), Section 4(b), and Section 4(c), and (iii) Executive shall not be entitled to severance benefits from the Company other than as contemplated under this Agreement, unless such other severance benefits provide for larger benefits than under this Agreement. 

5.NON-SOLICIT  

(a)During Executive’s employment with the Company, and for a period of twelve (12) months thereafter, Executive will not knowingly, separately or in association with others, materially and substantially interfere with, impair, disrupt or damage the Company’s relationship with any of the customers of the Company with whom Executive has had contact by contacting them for the purpose of inducing or encouraging any of them to divert or take away business from the Company and to an enterprise that is in direct competition with the Company Business; provided, however, that none of the foregoing restrictions shall preclude Executive from being employed by a consulting, financial or advisory firm that provides any advice or services to a person, enterprise or business that is in competition with the Company so long as Executive does not personally provide such advice or services to the competing person, enterprise or business.

(b)During Executive’s employment with the Company, and for a period of twelve (12) months thereafter, Executive will not, knowingly, separately or in association with others, materially and substantially, interfere with, impair, disrupt or damage the Company’s business by directly contacting any Company officers or key employees for the purpose of inducing or encouraging them to discontinue their employment with the Company; provided, however, that the foregoing provisions shall not (i) restrict Executive from directly or indirectly making any general solicitation for employees, making a public advertising or participating in any job fairs or recruiting workshops or (ii) preclude Executive from soliciting and/or hiring any officer, key employee or other person at any time (A) in the case of voluntary terminations, later than six (6) months after such person’s termination of employment from the Company and (B) in the case of all other terminations, after such person’s termination of employment from the Company. 

6.INDEMNIFICATION; INSURANCE 

(a)During the Term of this Agreement and thereafter, the Company shall indemnify Executive to the fullest extent permitted under California law from and against any expenses (including but not limited to attorneys’ 

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fees, expenses of investigation and preparation and fees and disbursements of Executive’s accountants or other experts), judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by Executive in connection with any proceeding in which Executive was or is made party or was or is involved (for example, as a witness) by reason of the fact Executive was or is employed by or serving as an officer or director of the Company or any of its affiliates.  Such indemnification shall continue as to Executive during the Term of this Agreement and for so long thereafter as Executive may have exposure with respect to acts or omissions which occurred prior to his cessation of employment with the Company and shall inure to the benefit of Executive’s heirs, executors and administrators.  The Company shall advance to Executive all costs and expenses incurred by him in connection with any proceeding covered by this provision within 20 calendar days after receipt by the Company of a written request for such advance.  Such request shall include an undertaking by Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.  

(b)The Company agrees to purchase and maintain adequate Directors’ and Officers’ liability insurance from a reputable, nationally recognized and financially sound insurer with provisions that will provide coverage for Executive as a director, officer and employee as well as coverage as a former director, officer and employee following any termination of this Agreement or Executive’s employment and service on the Board.  Such insurance shall inure to the benefit of Executive’s heirs, executors and administrators.

7.CHANGE IN CONTROL

(a)In the event of a Change in Control (as defined below), 100% of any RSUs granted to Executive under Section 3(c) that are not yet vested shall vest immediately upon such Change in Control.  If such Change in Control occurs prior to Executive being awarded any RSUs under Section 3(c), Executive shall be granted, and fully vested in, the “Stretch” number of RSUs immediately prior to such Change in Control becoming effective.

(b)“Change in Control” shall mean (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the 1934 Securities Exchange Act) or group becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 Securities Exchange Act) or has the contractual right to acquire beneficial ownership, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; (ii) the consummation of the sale, lease or other disposition by the Company of all or substantially all of the Company’s assets (including any equity interests in subsidiaries); (iii) the consummation of a liquidation or dissolution of the Company; (iv) the consummation of a merger, consolidation, business combination, scheme of arrangement, share exchange or similar transaction involving the Company and any other corporation (“Business Combination”), other than a Business Combination which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such Business Combination or (v) any combination of the foregoing.  Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely as a result of (x) a repurchase or redemption of securities (which is open to all stockholders) by the Company done in the ordinary course of business and the purpose of which is not to effect a Change in Control or (y) a rights issue, recapitalization, capitalization, sub-division or consolidation or a share capital reduction and any other variation of the capital of the Company and/or rights in respect thereof, or capital distribution (being any distribution, whether in cash or in other specie, out of capital profits or capital reserves (including share premium account and any capital redemption reserve fund)) so long as in each instance it is done either as part of a reincorporation merger or in the ordinary course of business and in any event is not done to effect a Change in Control.

8.MISCELLANEOUS 

(a)Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.  Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement without the Company’s written consent, provided that upon Executive’s death, Executive’s named beneficiaries, estate or heirs, as the case may be, shall succeed to all of Executive’s rights under this Agreement.

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(b)Nonexclusivity Rights.  Executive is not prevented from continuing or future participation in any Company benefit, bonus, incentive or other plans, programs, policies or practices provided by the Company subject to the terms and conditions of such plans, programs, or practices. 

(c)Entire Agreement.  This Agreement supersedes any prior agreements or understandings, oral or written, with respect to employment of Executive and constitutes the entire Agreement with respect thereto.  This Agreement cannot be altered or terminated orally and may be amended only by a subsequent written agreement executed by both of the parties hereto or their legal representatives, and any material amendment must be approved by a majority of the voting shareholders of the Company. 

(d)Waiver.  Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement

(e)Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California. 

(f)Litigation Costs and Expenses.  In any action to enforce the terms of this Agreement, the prevailing party shall be reimbursed by the non-prevailing party for such prevailing party’s reasonable attorneys’ fees and costs, including the costs of enforcing a judgment.  

(g)Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions, which shall remain in full force and effect. 

(h)Interpretation; Construction.  The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement.  This Agreement has been drafted by legal counsel representing the Company, but Executive has participated in the negotiation of its terms.  Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

(i)Arbitration.  Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by arbitration in Los Angeles, California before three arbitrator(s).  The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures.  Judgment on the Award may be entered in any court having jurisdiction.  This clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a court of appropriate jurisdiction, in which case each party consents to the jurisdiction and venue of the state and federal courts located in Los Angeles, California. All forum costs related to such arbitration shall be borne by the Company.

(j)Notices.  Any notices, requests or other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices.

(k)Cooperation.  If Executive is no longer employed by the Company for any reason, Executive and the Company shall in good faith negotiate future cooperation by Executive as reasonably requested by the Company at a reasonable rate for a period of no less than six (6) months.

9.COMPLIANCE WITH CODE SECTION 409A 

With respect to any compensation payable or benefits to be provided under this Agreement that are subject to Section 409A, this Agreement is intended to comply with the provisions of Section 409A.  In furtherance of this intent, to the extent that any compensation payable or benefits to be provided under this Agreement are subject to Section 409A, this Agreement shall be interpreted, operated, and administered in a manner consistent with these intentions, and the parties agree to amend this Agreement further (if necessary) in order to avoid the adverse tax consequences of 

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Section 409A.  Notwithstanding any other provision of this Agreement to the contrary, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A (together, the “Deferred Payments”) will be paid or otherwise provided until Executive has had a “separation from service” within the meaning of Section 409A.  Similarly, no severance payable to Executive, if any, that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Executive has had a “separation from service” within the meaning of Section 409A.  Each payment and benefit payable under this Agreement is intended to constitute a separate payment and the right to a series of installment payments under this Agreement will be treated as a right to a series of separate payments. If Executive is a “specified employee” within the meaning of Section 409A at the time of his “separation from service” (within the meaning of Section 409A), then the Deferred Payments that would otherwise be payable within the six (6) month period following his separation from service will be paid in a lump sum on the date six (6) months and one (1) day following the date of his separation from service (or the next business day if such date is not a business day).  All subsequent Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. If Executive dies following his separation from service, but prior to the six (6) month anniversary of his separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of his death and all other Deferred Payments will be payable in accordance with the payment schedule applicable to each payment or benefit.

10.COMPLIANCE WITH CODE SECTION 280G

In the event that it is determined by the Company in its sole discretion that any payment or benefit to the Executive under this Agreement, or otherwise, either cash or non-cash, that the Executive has the right to receive from the Company, including, but not limited to, accelerated vesting or payment of any deferred compensation, restricted stock or any benefits payable to Executive under any plan for the benefit of employees, would constitute an “excess parachute payment” (as defined in Section 280G of the Code), then such payments or other benefits will be either (a) delivered in full, or (b) delivered as to such lesser extent which would result in no portion of such payments or benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999 of the Code, results in the receipt by Executive on an after-tax basis of the greatest amount of payments and benefits, notwithstanding that all or some portion of such payments or benefits may be taxable under Section 4999 of the Code.  The order in which the payment will be reduced are (i) cash payments; (ii) equity-based payments that are taxable; (iii) equity-based payments that are not taxable; (iv) equity-based acceleration; and (v) other non-cash forms of benefits.  Within any such category of payments and benefits (that is, (i), (ii), (iii), (iv) or (v)), a reduction shall occur first with respect to amounts that are not “deferred compensation” within the meaning of Section 409A of the Code and then with respect to amounts that are.  In no event will Executive have any discretion with respect to the ordering of payment reductions.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

SPARK NETWORKS, INC.

		
	
By:
	
/s/ Michael J. McConnell

	
Name:
	
Michael J. McConnell

	
Title:
	
Executive Chairman

 

MICHAEL EGAN 

	
	
/s/ Michael Egan      

 

 

 

 

EXHIBIT A

Board Resignation Agreement

 

 

Upon resignation or termination from my position as Chief Executive Officer for any reason, with or without Cause, including but not limited to a Change in Control, I hereby immediately resign from my position on the Board of Directors of the Company and any subsidiary or affiliated entities. 

 

	
	
MICHAEL EGAN

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