Document:

Exhibit
4.2

 

CERTIFICATE OF DESIGNATION

OF

SERIES B PREFERRED STOCK

OF

TAKE-TWO INTERACTIVE SOFTWARE, INC.

 

 

Pursuant to Section 151 of the

General Corporation Law of

the State of Delaware

 

 

Take-Two
Interactive Software, Inc., a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the “Corporation”),
DOES HEREBY CERTIFY:

 

That, pursuant to
authority conferred by the Corporation’s Restated Certificate of Incorporation,
as amended (the “Certificate”) and by the provisions of Section 151
of the General Corporation Law of the State of Delaware, the Board of Directors
of the Corporation (the “Board”), at a duly called meeting held on
March 24, 2008, at which a quorum was present and acted throughout,
adopted the following resolutions, which resolutions remain in full force and
effect on the date hereof creating a series of 100,000 shares of Preferred
Stock having a par value of $0.01 per share, designated as Series B
Preferred Stock:

 

RESOLVED, that in
accordance with the provisions of the Certificate, the Board does hereby
create, authorize and provide for the issuance of a series of Preferred Stock,
par value $0.01 per share, of the Corporation, designated as “Series B
Preferred Stock,” having the voting powers, designation, relative,
participating, optional and other special rights, preferences, and
qualifications, limitations and restrictions thereof that are set forth as
follows:

 

Section 1.  Designation and Amount.  The shares of such class shall be designated
as “Series B Preferred Stock” (the “Series B Preferred Stock”) and
the number of shares constituting such class shall be 100,000.  Such number of shares may be increased or
decreased by resolution of the Board of Directors, provided that no such
decrease shall reduce the number of shares of the Series B Preferred Stock
to a number less than the number of shares then outstanding, plus the number
reserved for issuance upon the exercise of options, rights or warrants, or upon
conversion of any outstanding securities issued by the Corporation convertible
into Series B Preferred Stock.

 

 

Section 2.               Dividends and Distributions.  (A) Subject to the prior and superior
rights of the holders of any shares of any other class or series of Preferred
Stock of the Corporation ranking prior and superior to the shares of
Series B Preferred Stock with respect to dividends, each holder of a share
(a “Share”) of Series B Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for that purpose, (i) quarterly dividends payable in cash on the
last day of March, June, September, and December in each year (each such
date being a “Quarterly Dividend Payment Date”), commencing on the first
Quarterly Dividend Payment Date after the first issuance of such Share of
Series B Preferred Stock, in an amount per Share (rounded to the nearest
cent) equal to the greater of (a) $1.00 or (b) subject to the
provision for adjustment hereinafter set forth, one thousand (1,000) times an
amount equal to (x) the aggregate per share amount of all cash dividends
declared on shares of the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of a Share of Series B
Preferred Stock, minus (y) the amount in cash actually paid per share of
Common Stock pursuant to Section 2(B) below since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of a Share of Series B
Preferred Stock, and (ii) subject to the provision for adjustment
hereinafter set forth, quarterly distributions (payable in kind) on each
Quarterly Dividend Payment Date in an amount per Share equal to one thousand
(1,000) times the aggregate per share amount of all non-cash dividends or other
distributions (other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock, by reclassification or
otherwise) declared on shares of Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or with respect to the first Quarterly
Dividend Payment Date, since the first issuance of a Share of Series B
Preferred Stock.  In the event that the
Corporation shall at any time after March 24, 2008 (the “Rights
Declaration Date”) (i) declare any dividend on outstanding shares of
Common Stock payable in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock or (iii) combine outstanding shares of Common Stock
into a smaller number of shares, then in each such case the amount to which the
holder of a Share of Series B Preferred Stock was entitled immediately
prior to such event pursuant to the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be the
number of shares of Common Stock that are outstanding immediately after such
event and the denominator of which shall be the number of shares of Common
Stock that were outstanding immediately prior to such event.

 

(B)           The Corporation shall declare a
dividend or distribution on Shares of Series B Preferred Stock as provided
in paragraph (A) above immediately after it declares a dividend or
distribution on the shares of Common Stock (other than a dividend or
distribution payable in shares of Common Stock); provided, however,
that in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Date, a dividend of $1.00 per Share on
the Series B Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.

 

(C)           Dividends shall begin to accrue and
shall be cumulative on each outstanding Share of Series B Preferred Stock
from the Quarterly Dividend Payment Date next 

 

2

 

preceding the date
of issuance of such Share of Series B Preferred Stock, unless the date of
issuance of such Share is prior to the record date for the first Quarterly
Dividend Payment Date, in which case, dividends on such Share shall begin to
accrue from the date of issuance of such Share, or unless the date of issuance
is a Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Shares of Series B Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear
interest.  Dividends paid on Shares of
Series B Preferred Stock in an amount less than the aggregate amount of
all such dividends at the time accrued and payable on such Shares shall be
allocated pro rata on a share-by-share basis among all Shares of Series B
Preferred Stock at the time outstanding. 
The Board of Directors may fix a record date for the determination of
holders of Shares of Series B Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be no
more than 30 days prior to the date fixed for the payment thereof.

 

Section 3.  Voting Rights.  The holders of Shares of Series B
Preferred Stock shall have the following voting rights:

 

(A)          Subject to the provision for
adjustment hereinafter set forth, each Share of Series B Preferred Stock
shall entitle the holder thereof to one thousand (1,000) votes on all matters
submitted to a vote of the holders of Common Stock of the Corporation.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on
outstanding shares of Common Stock payable in shares of Common Stock,
(ii) subdivide outstanding shares of Common Stock or (iii) combine
the outstanding shares of Common Stock into a small number of shares, then in
each such case the number of votes per Share to which holders of Shares of
Series B Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after such event and the denominator of which shall be the number of shares of
Common Stock that were outstanding immediately prior to such event.

 

(B)           Except as otherwise provided herein
or in any other Certificate of Designation creating a series of preferred
stock, or any similar stock, or by law, the holders of Shares of Series B
Preferred Stock, the holders of shares of Common Stock, and the holders of any
other class or series of capital stock of the Corporation entitled to vote
generally, together with the Common Stock, shall vote together as one class on
all matters submitted to a vote of the holders of such stock.

 

(C)           (i) If at any time dividends on
any Shares of Series B Preferred Stock shall be in arrears in an amount
equal to six quarterly dividends thereon, then during the period (a “default
period”) from the occurrence of such event until such time as all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all Shares of Series B Preferred
Stock then outstanding shall have been declared and paid or set apart for
payment, the holders of the outstanding Shares of Series B Preferred
Stock, together with the holders of outstanding shares of any one or more other

 

3

 

classes or series
of stock of the Corporation upon which like voting rights have been conferred
and are exercisable (voting together as a class), shall have the right to elect
two Directors to the Board of Directors of the Corporation at the Corporation’s
next annual meeting of stockholders, and so long as such default period
continues, shall have the right to elect a successor to each of the two
Directors so elected upon the expiration of their respective terms, such right
to be exercised at the subsequent annual meeting or meetings at which the respective
terms of such Directors expire.  Any
Director who shall have been so elected pursuant to this paragraph may be
removed only for cause.  If the office of
any Director elected by the holders of Shares of Series B Preferred Stock
pursuant to this paragraph becomes vacant for any reason, the remaining
Director elected pursuant to this paragraph may choose a successor who shall
hold office for the unexpired term in respect of which such vacancy occurred,
and if the offices of both such Directors elected by the holders of Shares of
Series B Preferred Stock pursuant to this paragraph become vacant for any
reason, such vacancies may be filled for the unexpired term in respect of which
such vacancy occurred only by the affirmative vote of the holders of the outstanding
Shares of Series B Preferred Stock, together with the holders of the
outstanding shares of any other class or series of stock upon which like voting
rights have been conferred and are exercisable (voting together as a class).

 

(ii)           The voting rights vested pursuant to
paragraph (C)(i) hereof in the holders of the outstanding Shares of
Series B Preferred Stock, together with the holders of outstanding shares
of any one or more other classes or series of stock of the Corporation upon
which like voting rights have been conferred and are exercisable (voting
together as a class), may not be exercised at any annual meeting unless
one-third of the outstanding shares of stock of the corporation upon which such
voting rights have been conferred shall be present at such meeting in person or
by proxy.  The absence of a quorum of the
holders of Common Stock shall not affect the exercise by the holders of Shares
of Series B Preferred Stock of such rights.  In connection with the election of Directors
pursuant to paragraph (C)(i) hereof, each holder of Shares of
Series B Preferred Stock shall be entitled to one vote for each one
one-thousandth of a Share held (the holders of shares of any other class or
series of preferred stock having like voting rights being entitled to such
number of votes, if any, for each share of such stock held as may be granted to
them).

 

(iii)          During any default period, the holders
of shares of Common Stock, and Shares of Series B Preferred Stock, and
other classes or series of stock of the Corporation, if applicable, shall
continue to be entitled to elect (voting together as a class) all the Directors
other than the two Directors to be elected pursuant to paragraph
(C)(i) hereof by the holders of the outstanding shares of Series B
Preferred Stock, together with the holders of outstanding shares of any one or
more other classes or series of stock of the Corporation upon which like voting
rights have been conferred and are exercisable (voting together as a class).

 

(iv)          Immediately upon the expiration of a
default period, (x) the right of the holders of Shares of Series B
Preferred Stock to elect Directors pursuant to paragraph (C)(i) hereof
shall cease (subject to re-vesting in the event of each and every subsequent
default of the character mentioned in paragraph (C)(i) above), and
(y) the term of any Directors elected by the holders of Shares of
Series B Preferred Stock pursuant to paragraph (C)(i) hereof shall
terminate.

 

4

 

(D)          Except as set forth herein, holders of
Shares of Series B Preferred Stock shall have no special voting rights and
their consents shall not be required (except to the extent they are entitled to
vote with holders of share of Common Stock as set forth herein) for taking any
corporate action.

 

Section 4.  Certain Restrictions.  (A)  Whenever quarterly dividends or
other dividends or distributions payable on Shares of Series B Preferred
Stock as provided in Section 2 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
outstanding Shares of Series B Preferred Stock shall have been paid in
full, the Corporation shall not

 

(i)            declare or pay dividends on, or make
any other distributions on, any shares of Junior Stock;

 

(ii)           declare
or pay dividends on or make any other distributions on any shares of Parity
Stock, except dividends paid ratably on Shares of Series B Preferred Stock
and shares of all such Parity Stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of such Shares
and all such shares are then entitled;

 

(iii)          redeem
or purchase or otherwise acquire for consideration shares of any Junior Stock, provided,
however, that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such Junior Stock in exchange for shares of any
Junior Stock; provided, further, that the Corporation may
repurchase shares of Common Stock owned by terminated employees of, or
consultants to, the Corporation or its subsidiaries;

 

(iv)          redeem
or purchase or otherwise acquire for consideration any Shares of Series B
Preferred Stock, or any Parity Stock except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates, and other relative
rights and preferences of the respective series and classes, shall determine in
good faith, will result in fair an equitable treatment among the respective
series or classes.

 

(B)           The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.

 

Section 5.  Reacquired Shares.  Any Shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof.  All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock, par value $.01 per 

 

5

 

share, and may be
reissued as part of a new series of Preferred Stock, subject to the conditions
and restrictions on issuance set forth herein, in the Certificate, or in any
other Certificate of Designation creating a series of Preferred Stock, par
value $.01 per share, or any similar stock, or as otherwise restricted by law.

 

Section 6.  Liquidation, Dissolution or Winding Up.  (A)  Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation no distribution shall
be made (i) to the holders of shares of Junior Stock unless the holders of
Shares of Series B Preferred Stock shall have first received, subject to
adjustment as hereinafter provided in paragraph (B), an amount in cash equal to
the greater of either (a) $1.00 per Share plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not earned or
declared, to the date of such payment, or (b) the amount equal to one
thousand (1,000) times the aggregate per share amount to be distributed to
holders of shares of Common Stock, or (ii) to the holders of shares of
Parity Stock, unless simultaneously therewith distributions are made ratably on
Shares of Series B Preferred Stock and all other shares of such Parity
Stock in proportion to the total amounts to which the holders of Shares of
Series B Preferred Stock are entitled under clause (i)(a) of this
sentence and to which the holders of shares of such Parity Stock are entitled,
in each case upon such liquidation, dissolution or winding up.

 

(B)           In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any dividend on
outstanding shares of Common Stock payable in shares of Common Stock,
(ii) subdivide outstanding shares of Common Stock, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, then in
each such case the aggregate amount to which holders of Shares of Series B
Preferred Stock were entitled immediately prior to such event pursuant to
clause (i)(b) of paragraph (A) of this Section 6 shall be
adjusted by multiplying such amount by a fraction the numerator of which shall
be the number of shares of Common Stock that are outstanding immediately after
such event and the denominator of which shall be the number of shares of Common
Stock that were outstanding immediately prior to such event.

 

Section 7.  Consolidation, Merger, etc.  In case the Corporation shall enter into any
consolidation, merger, combination, or other transaction in which the shares of
Common Stock are exchanged for or converted into other stock, securities, cash,
and/or any other property, then in any such case Shares of Series B
Preferred Stock shall at the same time be similarly exchanged for or converted
into an amount per Share (subject to the provision for adjustment hereinafter
set forth) equal to one thousand (1,000) times the aggregate amount of stock,
securities, cash, and/or other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is converted or exchanged.  In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on
outstanding shares of Common Stock payable in shares of Common Stock,
(ii) subdivide outstanding shares of Common Stock, or (iii) combine outstanding
Common Stock into a smaller number of shares, then in each such case the amount
set forth in the immediately preceding sentence with respect to the exchange or
conversion of Shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be the
number of shares of Common Stock that are outstanding immediately after such
event 

 

6

 

and the
denominator of which shall be the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

Section 8.  Conversion; Redemption.  The Shares of Series B Preferred Stock
shall not be convertible into any other class or series of capital stock of the
Corporation, or redeemable.

 

Section 9.  Ranking.  Except as provided below, the Series B
Preferred Stock shall rank junior to all other series of Preferred Stock, par
value $.01 per share, and to any other class of preferred stock that hereafter
may be issued by the Corporation as to the payment of dividends and the
distribution of assets, unless the terms of any such series or class shall
provide otherwise.  The Series B
Preferred Stock shall rank prior, as to dividends and upon liquidation,
dissolution, or winding up, to the Common Stock.

 

Section 10.  Amendment.  Except as set forth in Section 1 hereof,
at any time that any Shares of Series B Preferred Stock are outstanding,
the Certificate, including, without limitation, this Certificate of Designation
shall not be amended, either directly or indirectly, or through merger or
consolidation with another corporation or otherwise, in any manner that would
alter or change the powers, preferences or special rights of the Series B
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two thirds of the outstanding Shares of Series B
Preferred Stock, voting separately as a class.

 

Section 11. Fractional
Shares.  The Series B Preferred
Stock may be issued in fractions of one one-thousandth of a Share or other
fractions of a share, which fractions shall entitle the holder, in proportion
to such holder’s fractional shares, to exercise voting rights, receive
dividends, participate in distributions, and to have the benefit of all other
rights of holders of Series B Preferred Stock.

 

Section 12.  Definitions. All capitalized terms
used herein have the meanings ascribed to them in the Certificate, unless
otherwise defined herein.  In addition,
for purposes hereof, the following terms shall have the meanings set forth
below:

 

(A)          The term “Common Stock” shall
mean the class of stock designated as the Common Stock, par value $.01 per
share, of the Corporation at the date hereof or any other class of stock
resulting from successive changes or reclassification of such Common Stock.

 

(B)           The term “Junior Stock”
(i) as used in Section 4, shall mean the Common Stock and any other
class or series of capital stock of the Corporation hereafter authorized or
issued over which the Series B Preferred Stock has preference or priority
as to the payment of dividends and (ii) as used in Section 6, shall
mean the Common Stock and any other class or series of capital stock of the
Corporation over which the Series B Preferred Stock has preference or
priority in the distribution of assets on any liquidation, dissolution or
winding up of the Corporation.

 

(C)           The term “Parity Stock”
(i) as used in Section 4, shall mean any class or series of stock of
the Corporation hereafter authorized or issued ranking pari  passu
with the 

 

7

 

Series B
Preferred Stock as to the payment of dividends and (ii) as used in
Section 6, shall mean any class or series of stock of the Corporation
hereinafter authorized or issued and ranking pari  passu with the
Series B Preferred Stock as to the distribution of assets on any
liquidation, dissolution, or winding up of the Corporation.

 

[END OF TEXT. 
SIGNATURE PAGE FOLLOWS.]

 

8

 

IN WITNESS
WHEREOF, Take-Two Interactive Software, Inc. has caused this Certificate
of Designation to be signed by its authorized officer this 26th day of March,
2008.

 

	
   

  	
  TAKE-TWO
  INTERACTIVE

  
	
   

  	
  SOFTWARE,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel P. Emerson

  
	
   

  	
   

  	
  Daniel P. Emerson

  
	
   

  	
   

  	
  Vice President, Associate
  General

  
	
   

  	
   

  	
  Counsel and Secretary

  

 

9Exhibit
10.1

 

March 25, 2008

 

Ms. Lainie
Goldstein

 

 

 

Dear
Lainie:

 

As
we have discussed, the parties have agreed to amend the terms of your (“you” or
“Employee”) July 16, 2007 Employment Agreement (“Agreement”) with Take-Two
Interactive Software, Inc. (the “Company”) as set forth below in this
first amendment (“Amendment”).  All
capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.  Unless explicitly modified herein, the terms
and conditions of the Agreement remain in full force and effect.

 

	
  Annual Salary:

  	
   

  	
  Effective
  as of March 25, 2008, Employee’s Salary is hereby increased to $500,000.
  The last sentence of Section 3(a) of the Agreement is hereby
  amended and restated in its entirety as follows: “During the Term (including
  during the Initial Term), such Salary shall be subject to annual review at
  the end of each fiscal year of the Company by the Compensation Committee of
  the Board and may be increased from time to time at the discretion of the
  Compensation Committee of the Board.” During the Term, Employer shall pay the
  Employee the Salary then in effect pursuant to the terms of this Agreement.

  
	
   

  	
   

  	
   

  
	
  280G:

  	
   

  	
  To
  the extent that any amounts payable to (or for the benefit of) Employee pursuant
  to the Agreement or this Amendment, as well as any other “parachute
  payments,” as such term is defined under Section 280G of the U.S.
  Internal Revenue Code (the “Code”), payable to (or for the benefit of)
  Employee with respect to the Company, exceed the limitation of
  Section 280G of the Code such that an excise tax will be imposed under
  Section 4999 of the Code, the provisions of Exhibit A attached
  hereto shall apply and are incorporated herein.

  

 

Any
terms and conditions of employment set out in the Agreement and not explicitly
modified herein shall remain in full force and effect for the duration of your
employment.  The Agreement and this
Amendment comprise the parties’ entire agreement and supersede any and all
other agreements, either oral or in writing, between you and the Company with
respect to your employment with the Company, and contain all of the covenants
and agreements between the parties with respect to such employment in any
manner whatsoever.  Any modification or
termination of these agreements will be effective only if in writing and signed
by the party to be charged.  Please
indicate your acceptance of this Amendment by signing below and returning an
executed copy of this letter to me.

 

[End of text —
signature page follows]

 

 

 

 

Please contact me with any questions or concerns.

 

Sincerely,

 

 

/s/ Karl Slatoff

 

Karl Slatoff

Executive Vice President

Take-Two Interactive Software, Inc.

 

 

 

	
  /s/ Lainie Goldstein

  	
   

  	
  Date: 3/25/08

  
	
  LAINIE
  GOLDSTEIN

  	
   

  

 

 

 

 

EXHIBIT A

 

PARACHUTE TAX INDEMNITY PROVISIONS

 

                                This Exhibit A
sets forth the terms and provisions applicable to Employee pursuant to the
provisions of the 280G Section of the Amendment.  This Exhibit A shall be subject in all
respects to the terms and conditions of the Agreement and the Amendment.  Capitalized terms used without definition in
this Exhibit A shall have the meanings set forth in the Agreement or the
Amendment.

 

(i)            In the event that Employee shall
become entitled to payments and/or benefits provided by the Agreement or the
Amendment or any other amounts to (or for the benefit of) Employee that
constitute “parachute payments,” as such term is defined under Section 280G
of the Code, as a result of a change in ownership or effective control of the
Company or in the ownership of a substantial portion of the assets of the
Company (collectively, the “Company Payments”), and such Company
Payments will be subject to the tax (the “Excise Tax”) imposed by Section 4999
of the Code (and similar tax, if any, that may hereafter be imposed by any taxing
authority), the Company shall pay to Employee at the time specified in clause (v) hereof
an additional amount (the “Gross-Up Payment”) such that the net amount
retained by Employee from the Company Payments together with the Gross-Up
Payment, after deduction of any Excise Tax on the Company Payments and any U.S.
federal, state, and local income or payroll tax upon the Gross-Up Payment
provided for by this clause (i), but before deduction for any U.S. federal,
state, and local income or payroll tax on the Company Payments, shall be equal
to the Company Payments.

 

(ii)           Notwithstanding the foregoing
provisions of this Exhibit A to the contrary, if it shall be determined
that Employee is entitled to a Gross-Up Payment, but the Company Payments do
not exceed 115% of the greatest amount (the “Reduced Amount”) that could
be paid to Employee such that the receipt of the Company Payments would not
give rise to any Excise Tax, then no Gross-Up Payment shall be made to Employee
and the Company Payments, in the aggregate, shall be reduced to the Reduced
Amount.  In the event that the Internal
Revenue Service or court ultimately makes a determination that the “excess
parachute payments” plus the “base amount” is an amount other than as
determined initially, an appropriate adjustment shall be made with regard to
the Gross-Up Payment or Reduced Amount, as applicable, to reflect the final
determination and the resulting impact on whether this clause (ii) applies.

 

(iii)          For purposes of determining whether
any of the Company Payments and Gross-Up Payment (collectively, the “Total Payments”)
will be subject to the Excise Tax and the amount of such Excise Tax, (A) the
Total Payments shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of
the Code, and all “parachute payments” in excess of the “base amount” (as
defined under Section 280G(b)(3) of the Code) shall be treated as
subject to the Excise Tax, unless and except to the extent that, in the opinion
of the Company’s independent certified public accountants appointed prior to
any change in ownership (as defined under Section 280G(b)(2) of the
Code) or a certified public accountant
appointed following a change in ownership that is mutually acceptable to the
Company and the Employee, or tax counsel selected by such accountants or
the Company (the “Accountants”) such Total Payments (in whole or in
part):  (1) do not constitute “parachute
payments,” (2) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in
excess of the “base amount” or (3) are otherwise not subject to the Excise
Tax, and (B) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the
principles of Section 280G of the Code. 
In the event that the Accountants 

 

 

 

 

are
serving as accountants or auditors for the individual, entity or group
effecting the change in control (within the meaning of Section 280G of the
Code), Employee may appoint another nationally recognized accounting firm to
make the determinations hereunder (which accounting firm shall then be referred
to as the “Accountants” hereunder).  All
determinations hereunder shall be made by the Accountants which shall provide
detailed supporting calculations both to the Company and Employee at such time
as it is requested by the Company or Employee. 
The determination of the Accountants, subject to the adjustments
provided below, shall be final and binding upon the Company and Employee.

 

(iv)          For purposes of determining the amount
of the Gross-Up Payment, Employee’s marginal blended actual rates of federal,
state and local income taxation in the calendar year in which the change in
ownership or effective control that subjects Employee to the Excise Tax occurs
shall be used.  In the event that the
Excise Tax is subsequently determined by the Accountants to be less than the
amount taken into account hereunder at the time the Gross-Up Payment is made,
Employee shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the prior
Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and U.S. federal, state and
local income tax imposed on the portion of the Gross-Up Payment being repaid by
Employee if such repayment results in a reduction in Excise Tax or a U.S.
federal, state and local income tax deduction), plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code.  Notwithstanding the foregoing, in
the event that any portion of the Gross-Up Payment to be refunded to the
Company has been paid to any U.S. federal, state and local tax authority,
repayment thereof (and related amounts) shall not be required until actual
refund or credit of such portion has been made to Employee, and interest
payable to the Company shall not exceed the interest received or credited to
Employee by such tax authority for the period it held such portion.  Employee and the Company shall mutually agree
upon the course of action to be pursued (and the method of allocating the
expense thereof) if Employee’s claim for refund or credit is denied.  In the event that the Excise Tax is later
determined by the Accountants or the Internal Revenue Service (or other taxing
authority) to exceed the amount taken into account hereunder at the time the
Gross-Up Payment is made (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest or penalties payable with respect to such excess) promptly
after the amount of such excess is finally determined.

 

(v)           The Gross-Up Payment or portion
thereof provided for in clause (iv) above shall be paid not later than the
sixtieth (60th) day following an event occurring which subjects Employee to the
Excise Tax; provided, however, that if the amount of such
Gross-Up Payment or portion thereof cannot be finally determined on or before
such day, the Company shall pay to Employee on such day an estimate, as
determined in good faith by the Accountants, of the minimum amount of such
payments and shall pay the remainder of such payments (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code), subject
to further payments pursuant to clause (iv) above, as soon as the amount
thereof can reasonably be determined, but in no event later than the ninetieth
(90th) day after the occurrence of the event subjecting Employee to the Excise
Tax.  Subject to clauses (iv) and (ix) of
this Exhibit A, in the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to Employee, payable on the fifth (5th) day
after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).

 

(vi)          In the event of any controversy with
the Internal Revenue Service (or other taxing authority) with regard to the
Excise Tax, Employee shall permit the Company to control issues 

 

 

 

 

related
to the Excise Tax (at its expense), provided that such issues do not
potentially materially adversely affect Employee, but Employee shall control
any other issues.  In the event that the
issues are interrelated, Employee and the Company shall in good faith cooperate
so as not to jeopardize resolution of either issue, but if the parties cannot
agree, Employee shall make the final determination with regard to the
issues.  In the event of any conference
with any taxing authority as to the Excise Tax or associated income taxes,
Employee shall permit the representative of the Company to accompany Employee,
and Employee and Employee’s representative shall cooperate with the Company and
its representative.

 

(vii)         The Company shall be responsible for
all charges of the Accountants.

 

(viii)        The Company and Employee shall promptly
deliver to each other copies of any written communications, and summaries of
any verbal communications, with any taxing authority regarding the Excise Tax
covered by this Exhibit A.

 

(ix)           Nothing in this Exhibit A is
intended to violate the Sarbanes-Oxley Act of 2002 and to the extent that any
advance or repayment obligation hereunder would do so, such obligation shall be
modified so as to make the advance a nonrefundable payment to Employee and the
repayment obligation null and void.

 

(x)            Notwithstanding the foregoing, any
payment or reimbursement made pursuant to this Exhibit A shall be paid to
Employee promptly and in no event later than the end of the calendar year next
following the calendar year in which the related tax is paid by Employee.

 

(xi)           The provisions of this Exhibit A
shall survive the termination of Employee’s employment with the Company for any
reason and any amount payable under this Exhibit A shall be subject to the
provisions of Section 8(h) of the Agreement.

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